Digital River (NASDAQ: DRIV) is viewed by many as a bellwether for the digital economy, so yesterday’s upgrade by Credit Suisse analyst Philip Winslow adds another log to the recovery fire. As Eric Savitz at Tech Trader Daily writes, Winslow raised his rating on the e-commerce outsourcing company to Outperform from Neutral, boosting his price target to $44, from $37.
With re-accelerating year-over-year revenue growth forecasted for the second half of 2009 and 2010 and EPS re-acceleration beginning in the December 2009 quarter, combined with potential upside to near-term consensus estimates for the September quarter, we view the risk/reward of Digital River’s stock as attractive.
A review of Alacra Street Pulse finds that Winslow is just the latest in a series of positive comments about Digital River.
In early March, Deutsche Bank analyst Jeetil Patel upped his rating on the stock to Buy from Hold and increased his price target on the e-commerce services provider to $30 from $20.
However, he lowered it back to Hold at the end of July with target of $37. At the same time, Wedbush Morgan maintained its hold rating with a $40 target, and both Oppenheimer and Janney Montgomery Scott thought it was fairly valued at $40 and in early August Piper Jaffray’s Gene Munster reiterated his neutral stance but said he was “warming to DRIV shares” as “an attractive play on eCommerce, in our opinion.”
More negative was from Collins Stewart:
Weak PC shipments, higher traction for Netbooks, and MSFT’s new “anytime upgrade” program for Windows 7 do not bode well for DRIV. We reit our Hold until we find a materially lower entry point or start seeing signs of consumer spending stabilizing.
Most prescient was Robert Breza at RBC Capital Markets who in early April upgraded the company from sector perform to outperform and raised his target from $40 from $25.
The migration of the consumer online is a long-term trend that should benefit DRIV and the expanded portfolio should reduce customer dependence.” Robert Breza, RBC Capital Markets
In June, JMP analyst Sameet Sinha upgraded the stock to “Market Outperform” from “Market Perform,” citing strong business fundamentals and strength in the company’s digital download service business.
“From a business fundamental perspective, I think the value proposition of digital distribution has gained momentum over the past years,” he said, referring to the closures of electronics retailers such as Circuit City. “We’ve seen retail stores close ..there’s been a significant reduction in shelf space.”
Also in June, Sramana Mitra wrote that
The recession doesn’t seem to be troubling Digital River, Inc. too much as they continued to execute flawlessly.
Digital River believes that the current economic conditions are ideal for driving consolidation in the retail market.
As publishers and consumer electronics companies continue to be squeezed by retailers, direct-to-consumer channels will become a more attractive way to offset declining retail revenues, thus giving Digital River an added advantage. -Sramana Mitra
In a new Summary Due Diligence report, SADIF Investment Analytics said
Digital River, Inc. is an above average quality company with a neutral outlook. Digital River, Inc. has strong business growth and is run by passable management. When compared to its closest peer, Dassault Systemes S.A., Digital River, Inc. shows similar overvaluation and is more likely to outperform the market.
Standard & Poor’s fair value calculation on Sep 12 was $41.90 (slightly undervalued) and the technical outlook was bearish.
DRIV closed yesterday at $39.43