Zacks Analyst Interview Highlights: NDS Group, News Corp. and SAP

Zacks Analyst Interview Highlights: NDS Group, News Corp. and SAP

Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Robert Perri, who discusses NDS Group (Nasdaq: NNDS), News Corp. (NYSE: NWS) and SAP (NYSE: SAP).

A synopsis of today’s Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.

Has the sell-off in major markets, in the U.S. especially, been negatively affecting companies in your coverage?

Yes it has. Actually, a lot of the European companies have been down as well; many stocks have been battered with the recent sell-off. The European markets are also down, as well. But you have to be selective. Some stocks that have gone down were selling at lofty valuations to begin with, and while they were knocked down by the weakness in the markets, sometimes it’s better that they stay there. While other companies that have been beaten up have been for no reason. So it’s good to be selective in what you’re looking at.

Is this creating some buying opportunities?

Yes it is. One of my primary Buy stocks is NDS Group (Nasdaq: NNDS). They actually reported a great quarter and the stock went up on the day they reported, but then they also reported the day before the market tanked, and it got taken down with the rest of the companies. And it was knocked down more than it went up after great earnings results.

The company NDS is based in the U.K., but they sell throughout the world. They make the smart cards for cable set-top boxes, and they are I think 70% owned by News Corp. (NYSE: NWS). They have a lot of clients that they get through News Corp., and they’re selling at, I think, 18 ½-times earnings. And they’ve been growing at 15% per year, and we expect that to continue in the near term, at least through 2008, 2009.

So it’s even a stronger Buy now that it went down along with the rest of the market, then?

Yes. It’s come back a little bit, so it’s about where it was after they reported, but it’s still only selling at 18.5x our 2008 earnings estimate of $2.58 per share. So we think it could go at least to 20-25x earnings. Around $58 per share is our price target.

In general, how has this earnings season gone for foreign technology companies?

This earnings season has actually been a lot like the first quarter in that a lot of the companies reported solid results, but they’ve been very cautious about what they expect in the second half [of the year]. Only a select few companies have raised their guidance. In fact, many companies have maintained their guidance after beating estimates in the second quarter. So they’re actually effectively lowering guidance for the second half of the year, despite strong results in the second quarter.

Are there any specific success stories that you’ve seen in Q2?

NDS did well, as I mentioned. They report in U.S. dollars even though they’re based in Europe, so the dollar helped their revenues a bit, but it also hindered their margins. But they were still able to cut costs strong enough that it didn’t affect their margins so well.

Another company that actually did pretty well was SAP (NYSE: SAP), despite the weakness of the dollar. SAP reported a pretty solid quarter, despite the fact that they had the currency smacking them in the face.

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