Recent Upgrades for LogMeln Provide Traction

| About: LogMein, Inc. (LOGM)

LogMeln (NASDAQ:LOGM) is a company that provides on-demand, remote-connectivity solutions to small and medium-sized businesses and IT service providers. The stock made new highs on Friday and has benefitted from two recent upgrades. Let's examine.

LogMeln was first upgraded by J.P. Morgan a week and a half ago. Based on what we read and the technical action in the stock, we see potential upside into the low-to-mid $40s by year-end.
Here are the brief bullet points from J.P. Morgan’s upgrade on Thursday:

  • LOGM’s PT raised to $38, from $32, on the heels of strong growth in LOGM’s core business. LogMeln should be able to grow at a mid-to-high single digit sequential rate in the near-term.
  • Morgan is now anticipating Q4 numbers of $.32 on revenue of $29.2 Million. Estimates for next year get bumped up to $.79.
  • Morgan also likes the continued traction of LogMeln’s Ignition iPhone/iPad product, which has increased from 1% of total revenue in the March 2009 quarter to approximately 5% of total revenue during its latest quarter.

On Friday, the stock was upgraded by Piper Jaffrey. According to Piper, LogMeln will release another new product called One2Many next quarter. Although this product is expected to account for only 5% of 2012 revenues for the company, Piper feels that a higher multiple is warranted as the company proves its ability to add new products to its existing portfolio.

“Something new,” whether it is a new product, new management, or a new secular trend in an industry, is often the catalyst for outsized gains in a company’s sales and earnings and, ultimately, in its stock price. This could be the case for LogMeln.

Traders quickly responded to Piper’s upgrade with consistent buying all day on Friday. It should be noted that volume only improved 10% over its average daily volume. The action was nonetheless still impressive.

For now, we like what we see and would like to add to our small position in the name on pullbacks next week. We don’t envision this position becoming meaningful. Nonetheless, the company is an Apps play in the right space and we can easily see the market giving the company a much higher valuation should the current market tape improve into a strong up-trend in the coming months.

Disclosure: Long LOGM