Wireless Drives Allot on Record Outlook: Israel OvernightLeslie Picker
Allot Communications Ltd. advanced as prospects rising demand for wireless services will spur record revenue lured investors to the Israeli technology company trading 35 percent below its average valuation over the past year.
The shares gained as much as 1.5 percent in Tel Aviv today. They rallied 9.8 percent in the five days to March 15 in New York, capping Allot’s biggest advance since August and the best performance on the Bloomberg Israel-US Equity Index of the largest Israeli companies listed in the U.S. The gauge fell 0.6 percent March 15 and the shekel ended the day 0.3 percent stronger versus the dollar as Prime Minister Benjamin Netanyahu signed coalition deals to form a new government following January elections.
Allot, which makes products used by telecommunications companies to track wireless traffic, trades at 20.4 times estimated earnings in the U.S., compared with an average valuation of 31.3 over the past year, according to data compiled by Bloomberg. A doubling in global mobile data traffic last year burnished the company’s outlook, according to Northland Securities Inc., and Allot will post record sales of $124 million this year, the mean of 10 analysts’ estimates shows.
“The stock has been very beat up,” Alex Henderson, an analyst at Needham & Co. in New York who has rated Allot a buy since initiating coverage in November, said by phone March 14. “The company sells into a category that’s one of the hottest in telecom. There’s certainly some value investors and growth-at-a-reasonable-price investors nibbling at it.”
Allot shares, which closed unchanged at $14.42 in New York March 15, gained 8.3 percent in Tel Aviv last week. They rose 0.6 percent today to close at 52.88 shekels.
The company stands to gain as wireless carriers increase spending on services to help manage traffic, according to Needham’s Henderson. Telecommunications infrastructure spending was up 4 percent in 2012 and will grow this year, according to a December report by Infonetics Research, a Campbell, California-based research firm.
The Bloomberg Israel-US Index slipped to 90.61 March 15, while Israel’s benchmark TA-25 Index declined 0.5 percent today after last week’s advance of 1.1 percent.
Netanyahu’s Likud party signed coalition deals with two other factions March 15 that will enable him to form a new government. The new alliance, comprised of Likud, Yisrael Beitenu, Yesh Atid and Hatenuah, will hold 68 seats in Israel’s 120-member parliament, the Knesset. The coalition’s makeup should enable the government to make the budget cuts necessary to keep spending in check, after last year’s deficit came in above target.
“The commitment to free-market reforms is strong,” Steven Schoenfeld, the New York-based founder of BlueStar Global Investors LLC, said in a phone interview March 15. “There’s a strong consensus centered on fiscal deficit. The broad economic reforms are pretty much baked in.”
MagicJack VocalTec Ltd., which provides voice-over-Internet services, tumbled 13 percent to $12.91 in New York last week, the biggest weekly retreat in two months.