ThinkEquity is positive on On2 Technologies (AMEX:ONT) saying the shares have retreated roughly 20% after a solid run up into the Consumer Electronics Show (CES).
However, they believe 2007 is shaping up to be different than previous years, when ONT stock has fallen and remained out of favor (post-CES) in accordance with static financial results. Based on conversations with several industry contacts at CES, the firm believes that On2's sales pipeline is building better than their previously expected, giving them confidence to raise both their estimates and price target, as well as move up their breakeven estimate to 1Q'07. Firm reiterates On2 as their top pick for 2007.
According to checks, they believe that On2's pipeline is shaping up to outperform expectations. More promising, in firm's view, is that the company is also seeing an uptick relative to its average licensing deal, which they believe ranges from $60,000 to $100,000. This, coupled with a shift to a growing number of royalty or residual-based transaction structures, gives them increased confidence in the company's ability to outperform estimates.
Price tgt is raised to $1.70 from $1.40.
Notablecalls: Interesting little note that may move the stock. ONT is a recent trader favourite.