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SunTrust is somewhat surprisingly out positive on BEA Systems (NASDAQ:BEAS), saying they see numerous near-term catalysts ahead. Also, at current levels, they suggest the stock provides attractive risk/reward with downside to $11 in a market-driven sell off and upwards of $17.50 amid either the return to license revenue growth, and consequently earnings acceleration, or a possible buyout scenario.

Firm sees today's Analyst Day as the most immediate potential catalyst. Their sense is the company will likely continue somewhat of a surprisingly upbeat tone post the recent 2Q08 call. One Area of Constructive Checks. The firm was surprised by the robust license revenue activity in telco in 2Q08 (estimated license revenue of $29.5 million or close to 30% y/y growth) and believes the company was able to build backlog in that segment. Further checks suggest the large deal pipeline has improved strongly for 2H08, which could provide some offset to any struggles in its North American financial services business. Aside from potential large transactions in the telco license business, they believe the likely completion of restatements by late September could represent a catalyst.

While the likelihood of a near-term buyout has dissipated, they are comforted by the recent ownership appearance by well-known activist shareholders. SunTrust believes in the event that the current management is unable to engineer a marked recovery in license revenue over the intermediate term, a buyout scenario could resurface.

Maintains Buy rating and 12-month price target of $17.50 based on a strong belief that a corporate event could occur over the intermediate term.

Notablecalls: Recall that following TIBCO Software's (NASDAQ:TIBX) warning last week, Jefferies was out with a call highlighting other software players with large financial services exposure. BEAS topped that list. Yet, I chose to go with shorting Oracle (NYSE:ORCL) as I felt that with BEAS' stock down from recent highs, expectations weren't that high. This turned out the right decision as ORCL got hit and BEAS did essentially nothing.

Today's I'm somewhat surprised by SunTrust's positive call on BEAS. The firm suggests the large deal pipeline has improved, possibly offesetting any shortfalls on the financial services side. This, coupled with their expectations of an overall positive tone on today's Analyst Day may create some buy interest in the stock. The expected completion of the restatement may also help the sentiment.

Overall, an interesting call by SunTrust's Terry Tillman.

Source: Positive Call on BEA, Despite Financial Services Exposure