RealNetworks (NASDAQ: RNWK) delivers
digital information and entertainment. The firm's RealPlayer product downloads and streams audio, video, and other multimedia content. Its RealOne software and subscription service provides access to news, sports and entertainment content. Its Rhapsody digital music service delivers more than 1 billion songs per year. Its RealArcade is one of the largest casual games destinations on the Web. The company also assists businesses with tools for creating, delivering, and licensing digital content. Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Yahoo (NASDAQ: YHOO) are competitors.
The firm pleased investors last week, when it reported Q1 EPS of two cents and revenues of $147.6 million. Analysts had been looking for a loss of three cents and $141.6 million. Management also guided Q2/FY08 estimates above consensus views, announced a $50 million share repurchase program and said it intended to spin off its global casual games business. Kaufman Brothers reiterated its "buy" rating on the shares and boosted its price target to $9.
The stock
popped above 30-day moving average support on the news and then began to consolidate the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with five "strong buys", four "buys" and seven "holds". Analysts expect a 20% average annual growth rate, through the next five years. The RNWK Price to Sales ratio (1.80), Price to Book ratio (1.20) and Price to Cash Flow ratio (12.73) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 53% of the outstanding shares. Over the past 52 weeks, the stock has traded between $5.07 and $8.59. A stop-loss of $6.30 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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