Allot Communications Ltd. fell, creating the biggest discount to its Tel Aviv-traded stock since September, on concern policy makers will fail to contain the debt crisis in Europe, the biggest market for the networking-equipment maker.
Allot sank 7.2 percent to $16.77 in New York, the largest drop since Sep. 30. The decline was the biggest among members of the Bloomberg Israel-US 25 Index of the largest New York-traded companies. The measure gained less than 0.1 percent to 84.51, led by Teva Pharmaceutical Industries Ltd. Eighteen out of 25 companies in the gauge fell. Allot tumbled 6.5 percent to 65.21 shekels, or the equivalent of $17.16, at 10:30 a.m. in Tel Aviv.
German Chancellor Angela Merkel said there’s no easy and fast solution to the sovereign debt crisis in the euro-region, where Allot gets more than 50 percent of its sales. Even after yesterday’s drop, shares are headed for their biggest quarterly gain in a year as the Hod Hasharon, Israel-based company benefits from rising demand for systems that manage traffic on data networks and consumers buy more tablets and smartphones.
“This is the day to freak out about Europe, and Allot has the biggest exposure to the region among its group,” said Daniel Cummins, an analyst at ThinkEquity LLC in New York, who has a “buy” recommendation on the shares. “This is still a terrific company. Managers make their adjustments to portfolios on regional issues and sometimes you get a lot of pressure.”
Concern among investors that Europe’s debt crisis will curb demand for Israeli exports has pushed the Bloomberg Israel-US 25 Index and the Israeli benchmark’s TA-25 Index down 19 percent this year.
Allot’s 72 percent advance this quarter, and 44 percent gain this year, in New York, has boosted valuations to 38 times estimated profit while stocks in the Standard & Poor’s 500 Index fetch an average 12.2 times earnings.
The company’s third-quarter profit rose to $2.1 million from $800,000 a year earlier as revenue climbed 37 percent to $20.1 million.
Apple Inc.’s sales of iPhones rose 87 percent in the first nine months of the year and revenue from iPads jumped four-fold. Increased use of smartphones and tablets is boosting network traffic.
“I don’t know that there’s anything negative with the company, people know it’s a good business,” said Jay Srivatsa, an analyst at Chardan Capital Markets LLC in New York, who has a “buy” rating on the shares. “It’s the end of the year and part of it might be that investors closing the books.”
Allot’s gain this quarter hasn’t deterred analysts from recommending the stock. Of 10 analysts covering the company tracked by Bloomberg, all have either “buy” or “outperform” ratings.
Allot will probably report adjusted net income of $11.7 million this year, after reporting a net loss of $5.76 million in 2010, according to the average estimate of nine analysts surveyed by Bloomberg.
Israel, whose population of 7.7 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq stock market, the most of any country outside North America after China. It is also home to the largest number of startup companies per capita in the world.
Apple, the world’s biggest technology company, will open a research and development center in Israel, daily newspaper Globes reported on its website, without saying how it obtained the information.
Aharon Aharon, who was vice president of operations at Zoran Corp. and later founded high-tech venture Camero Tech Ltd., will head Apple’s operation in Israel, Globes said.
Kristin Huguet, a spokeswoman for Apple, said the company doesn’t comment on rumors and speculation.
Teva, the world’s largest maker of generic drugs, rose to the highest level in a month, adding 1.3 percent to $41.24. The Tel Aviv shares fell 0.1 percent to 154.30 shekels, or the equivalent of $40.49, yesterday. The New York shares are headed for a 21 percent drop this year, the worst annual performance since 2006. Teva shares rose 2 percent to 157.40 shekels, or $41.44, in Tel Aviv today.
Teva will host a conference next week to provide analysts with its 2012 business outlook. Teva will probably report sales of $21.9 billion next year, up 20 percent from this year, according to the average estimate of 25 analysts surveyed by Bloomberg.
Teva will see “tailwinds” next year, Randall Stanicky, an analyst at Canaccord Genuity in New York, wrote in a report on drugmakers last week. “We see most near-term upside in Teva.”
Ceragon Networks Ltd. fell 0.4 percent to $7.81 in New York yesterday. The shares declined 0.7 percent to 30.19 shekels, or the equivalent of $7.94, today.
Ceragon, the maker of wireless-networking systems, said in a statement yesterday that a mobile operator in Latin America selected the company to provide long-haul connectivity for new third-generation sites and enterprise users.
Israel’s government is planning a dollar-denominated bond sale in 2012, the first in three years, that may raise $1 billion to $1.5 billion, a Finance Ministry official said.
The timing of the bond issue, which will probably carry a 10-year maturity, will depend on market conditions, Senior Deputy Accountant General Eran Heimer said in an interview yesterday. UBS AG, Goldman Sachs Group Inc. and Barclays Plc have been chosen as lead managers for the sale, he said.
Current Account Surplus
Israel, whose foreign-currency debt is rated A+ by Standard & Poor’s, the same grade as Chile and Slovakia, last sold $1.5 billion in dollar debt in March 2009 that yielded 5.19 percent. The 10-year notes yielded 3.43 percent yesterday, or a spread of 153 basis points over U.S. Treasuries, compared with an average gap of 160 basis points, or 1.6 percentage point, for Chilean dollar-denominated securities, according to JPMorgan Chase & Co.’s EMBI Global index.
Israel’s current account bounced back into surplus after showing its first deficit since 2008, the Central Bureau of Statistics said in an e-mailed statement yesterday.
The seasonally adjusted surplus was $586 million in the three months through September, compared with a revised deficit of $247 million in the previous quarter. The bureau had previously reported a deficit of $560 million in the second quarter.
The shekel rose for the first time in four days gaining 0.3 percent to 3.7994 a dollar. The currency has dropped 7.4 percent this year and is headed for its worst performance since 2001.