In a note to clients, Lehman Brothers analysts Tim Luke and Jeff Kvaal wrote that they expect Comverse (CMVT) to exceed their $325 million revenue estimate for this quarter due to strong sales in the North American market. They kept their Overweight rating on the stock, increasing the price target from $29 (25x 2006 EPS of $0.82 plus $9 in cash) to $32 (25x CY07 EPS of $0.94 plus $9 in cash). According to Luke and Kvaal, CMVT continues to see traction for new applications:
With respect to development and traction of new applications, we believe recent momentum in the key Insight upgrade continues. Advanced messaging which includes mobile IM, mobile email, Unified Messaging, visual voicemail as well as SMS are also seeing solid trends – though certainly SMS growth rates while solid are more mature with new emerging applications in advanced messaging growing faster.
Mobile data enablers (gateways) and applications as well as new content applications (video portal, music – and in particular ring back tones) are also seeing encouraging early traction. New video applications remain the top selection by 3G carriers. We believe Comverse’s mobile avatars business – which enables users to create personal icons/visual signatures – is also showing early promise. We also remain encouraged around early traction within Comverse’s real time billing product.
Comverse's earnings call is scheduled for Wednesday.