Analysts Downgrade Cognos On Overdone Takeover Mania

Oct.10.07 | About: Cognos Inc. (COGN)

Cognos (COGN) shares have reversed course after Monday’s big run-up, as analysts at both Roth Capital and Jefferies & Co. downgraded their ratings on a valuation basis.

Monday, the business intelligence software company’s shares jumped following the news that SAP (NYSE:SAP) had agreed to buy Business Objects (BOBJ). That left Cognos as one of the few remaining companies in the sector without a dance partner, sparking speculation that it could be a target for Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM) or Microsoft (NASDAQ:MSFT). But Tuesday the speculation was fading.

Jefferies & Co.’s Robert Schwarz
cut his rating on the stock to Hold from Buy. He says the stock, which Monday ran up 14% to $50.50; “appears to fully reflect take-out multiples.” He keeps his price target on the stock at $48.

Likewise, Roth Capital’s Nathan Schneiderman drops his rating to Hold from Buy, even as he ups his target to $54 from $49. He says Cognos investors “have already captured the vast majority of the upside of a potential takeover bid.” He also worries that a takeover could take longer to materialize than some expect, “which could frustrate investors.” And he says there is a possibility that the company could miss November quarter EPS targets, “as the acquisition news could easily disrupt sales cycles.”