Veritas Software (VRTS ), like many other former tech highfliers, disappeared from view -- after plummeting from 174 in 2000 to 10 in late 2002. Now, it's back in favor with some investment managers. Veritas, No. 1 in data-storage management systems, rebounded lately -- to 25 on May 28. And Benjamin Pace, managing director at Deutsche Bank, which owns the stock, expects it to hit 33 in a year. He has upped tech holdings to 20% in his $8 billion portfolio -- way above their 13% share in the Standard & Poor's 500-stock index.
Last year, his tech holding was way below the S&P's level. "That's a bold move for us, especially because many techs sport rich [price-earnings] ratios," says Pace. He favors Veritas, now at 34 times his 2004 earnings estimate of 73 cents a share, in anticipation of stronger operating earnings -- as info-tech spending ratchets up with the economy. Veritas, which acquired Seagate's (STX ) storage operations in 1999, will be a tech leader as industry demand recovers, says Pace. He sees 2003 earnings of 65 cents. His numbers are in line with consensus estimates. This year, he expects Veritas revenues ($1.5 billion in 2002) to rise 7% in 2003 and 10% in 2004.
Robert Stimson of Banc of America Securities, who rates Veritas a buy, has an even higher 2004 estimate of 77 cents. Veritas' big customers include Microsoft, IBM, Dell, and Hewlett-Packard.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial