Wachovia initiated coverage on Blackbaud (BLKB) with outperform.
Analyst Kash Rangan says software and services for nonprofits is potentially a $4 billion-plus market with less than 20% penetration. He notes Blackbaud has strong a competitive position: current direct competitors are significantly smaller and offer only point solutions, and larger potential enterprise-software competitors are turned off by the market's low average selling prices, which are handicapped by their lack of nonprofit background or expertise. He sees 51 cents 2004 earnings per share and 57 cents in 2005.
Rangan thinks Blackbaud is roughly valued at a $500 million enterprise value, and says the shares, trading at 14 times the 2004 free cash flow of $35 million, look reasonably priced.