Pacific Growth Equities analyst J. Derrick Wood Friday morning raised his rating on RealNetworks (NASDAQ:RNWK) to Buy from Neutral, asserting that the stock looks cheap after a recent sell-off. Wood notes that the stock trades at 0.8x enterprise value/’07 sales, 9x ‘07 EBITDA and less than 2x cash. The stock is down 50% since late 2006.
Wood says he sees several potential upcoming catalysts for the stock:
Injection of $230 million for marketing over the next five years provided by Viacom (NYSE:VIA), as a result of the company’s new alliance with MTV. New alliance with Verizon (NYSE:VZ) to promote Rhapsody in the telecom provider’s 1,500 retail stores; the deal also includes integrated billing for music-centric phones. Availability of Rhapsody service with new TiVo (NASDAQ:TIVO) boxes.
With $3.20 in net cash/share, $2.90 in tangible book/share…a share buyback in place and our belief that fundamentals are intact and there are several potential catalysts on the horizon, we believe shares are oversold.
RNWK 1-yr chart: