In May and June, I wrote a series on what I think could be the top 25 stocks for the NEXT 25 years. It was a fun exercise and a lot of work. Since the series finished in mid-June, we've been knocked down from 25 stocks to 22 stocks: Opsware (NASDAQ: OPSW), Kyphon (NASDAQ: KYPH) and Color Kinetics (NASDAQ: CLRK) are all being acquired for significant premiums by obviously much larger companies.
We have another on our list that, although it's not being acquired, the stock has doubled in value these past 2 1/2 months. Blue Coat Systems (NASDAQ: BCSI) was written up on June 8. The stock was trading at $44, but it's now at $84.80. Blue Coat reported an absolutely explosive July quarter. Revenues came in at $62.4 million versus Street consensus of $58 million, representing a 71% year-over-year increase and a 15% up-sequentially from the April quarter.
The wide-area-network (WAN) optimization product set is gaining mainstream momentum. The even better news for Blue Coat Systems is that it is about to embark on an excellent new product cycle. The company saw bookings, pipeline and deferred revenues all go up substantially this past quarter and provide tremendous visibility going forward.
Blue Coat's fiscal year ends April 30, 2008. My previous estimate was for revenues of $251 million and earnings per share of $1.51. I have raised the estimates for April 2008 to revenues of $279 million and earnings per share of $1.90. For April 2009, my revenue estimate goes from $305 million to $340 million, and earnings per share from $2.15 to $2.60. My new near-term 12-month price target on Blue Coat Systems is $98, up from $70. Just a great story with an ever-expanding market.
Blue Coat does have significant momentum behind its business model and it sure is fun to see a stock nearly double in the past two or three months -- especially in this environment! The market capitalization is now $1.34 billion and has a long way to go before it becomes a mega-market cap name, but it sure is off to a great start ...
Georges Yared is the CIO of Yared Investment Research and the author of Stop Losing Money Today.
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Reader Comments (Page 1 of 1)
9-14-2007 @ 8:18PM
TraderMark said...
Good call on BCSI. I wanted to see 1 more round of earnings before getting on the bandwagon, to see if they truly morphed their business to include this WAN but along with RVBD, two great stocks to play the WAN optimization trend. Also both candidates for buyouts from larger players.
http://fundmyfund.blogspot.com/search/label/Blue%20Coat%20Systems