April 5 (Bloomberg) -- Allot Communications Ltd. is curbing a rally that made it the biggest gainer of Israeli stocks listed in the U.S. last month, as the network gear maker trades for more than double valuations on the Nasdaq Composite Index.
Allot, based in Hod Hasharon, Israel, plunged 4.4 percent to $22.50 yesterday, the biggest one-day decline since March 6. The shares jumped 30 percent last month, their largest advance since October and the most on the Bloomberg Israel-US Equity Index. Allot lost 3.9 percent to 83.07 shekels, or the equivalent of $22.22, at the 4:30 p.m. close in Tel Aviv today. The gauge of Israeli companies listed in New York slumped 1.3 percent yesterday, the biggest drop in a month. MagicJack VocalTec Ltd. slid the most in two months after its chairman resigned.
As more people use smartphones and computer tablets, rising demand for Allot’s technology to manage traffic on networks bolstered the stock to 41 times estimated earnings yesterday, from as little as 19.6 times six months ago. The average valuation for companies traded on the Nasdaq is 16.4 times projected earnings, data compiled by Bloomberg show. Allot’s 55 percent surge this year in the U.S. to a record on April 2 made it overpriced, according to Northland Securities Inc.
“It’s not that I don’t believe in the sector or the growth potential,” Catharine Trebnick, an analyst at Minneapolis-based Northland who cut her rating on the shares to the equivalent of hold on March 30, said in an interview yesterday. “The stock has gotten ahead of itself, that’s it.”
Fed Spooks Stocks
Global stock markets declined for a second day after the Federal Reserve signaled it may refrain from more monetary stimulus in minutes released yesterday, and as demand fell at a Spanish bond auction. The Nasdaq slumped 1.5 percent, its biggest one-day decline this year. Israel’s benchmark TA-25 Index advanced 0.3 percent today.
MagicJack, the Netanya, Israel-based company whose founders invented the technology to make phone calls over the Internet, tumbled 9 percent to $20.32, the biggest slide since Feb. 1. Ilan Rosen resigned as chairman as of April 1, and Gerald Vento, currently a board member, will probably replace him, Chief Executive Officer Dan Borislow said in a phone interview yesterday.
Allot probably won’t see revenue from deals with large U.S. wireless network operators until 2013, Peter Misek, an analyst at Jefferies & Co., wrote in a research note yesterday. Misek, who estimates sales will grow 21 percent this year to $93.9 million, boosted his price target to $25 from $21 and downgraded Allot shares to hold, as the company’s growth has already been reflected in the rally, he wrote.
‘Multi-Million Dollar Revenues’
Misek is one of two analysts to rate the shares the equivalent of hold. Eight recommend investors buy Allot, according to data compiled by Bloomberg.
Rami Hadar, Allot’s chief executive officer, said on a Feb. 7 conference call with analysts that he expects “multi-million dollar revenues” from sales to U.S. carriers in 2012.
Jay Kalish, executive director of investor relations for Allot, said by phone that the company doesn’t comment on movements in its share price.
Per-share earnings, excluding certain items, will jump to 55 cents this year from 38 cents in 2011, according to the average of 10 analyst estimates compiled by Bloomberg.
Allot still has room to rally as demand for technology to manage Internet traffic grows, according to Wedbush Securities Inc. Wedbush analysts including Research Associate Sanjit Singh raised their 12-month price target on the shares to $26 from $21 and reiterated an outperform rating, according to a note dated April 2.
“While the stock has seen significant strength in recent weeks, we believe demand for traffic management solutions remains healthy driven by rapid consumption of video and other bandwidth-intensive applications and the ubiquitous adoption of smartphones and tablets,” the analysts wrote. Investors “looking to capitalize on the growth of mobile data traffic” should buy the stock.
Smaller competitor Procera Networks Inc., based in Fremont, California, trades for 57 times estimated earnings. Procera shares fell 1.6 percent to $22.78 yesterday.
Internet Gold-Golden Lines Ltd., the Petach Tikva, Israel-based holding company that controls Bezeq Israeli Telecommunications Corp., lost 2.1 percent today to 21.61 shekels in Tel Aviv, the equivalent of $5.78. The shares fell 10 percent to $5.85 in New York yesterday.
Bezeq, Israel’s largest fixed-line phone company, was re-initiated yesterday with a sell rating and a 5-shekel price target at Psagot Investment House Ltd. IBI-Israel Brokerage & Investments Ltd. cut its rating on the stock to neutral from buy and reduced its price target to 6.7 shekels, according to a research note dated March 28.
Bezeq’s shares lost 0.9 percent in Tel Aviv today to 5.88 shekels.
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