(RTTNews) - Thursday, Credit Suisse upgraded Dice Holdings, Inc. (DHX:
News ) shares to Neutral from Underperform and increased its price target to $8 from $3.
Analyst Blackledge noted that DHX reported better than expected third quarter results and raised full year guidance given an uptick in customer contract renewals and new business activity. The analyst raised 2009 and 2010 estimates based on moderate improvements in business conditions and as a result is upgrading the stock to Neutral. The analyst raised price target based on his discounted cash flow analysis.
DHX outperformed the analyst's expectations in third quarter of 2009, as well as consensus and company expectations. The outperformance was a driven by a pickup in contract renewals, with renewal rates increasing to 60%, from 52.5% the past two quarters, though still below 65% renewal rate in third quarter of 2008. Also, new business activity increased in certain parts of the business.
It may get a little worse before it gets better for DHX, as the analyst expects fourth quarter of 2009 revenue to decline for the sixth sequential quarter in a row, in part due to some seasonality, and continued EBITDA declines, but overall, with contract renewals improving and new business activity picking up, DHX should see the benefits at some point in 2010.
The analyst would expect top-line to continue to be weak in first half of 2010 as DHX's revenue generally lags a macro recovery, but improving business conditions led him to increasing our 2010 estimates modestly. The analyst is also encouraged that DHX is looking to invest in the key areas, product development and marketing, as it gears up for growth down the road.
DHX is trading at 9.5x EV/EBITDA based on the analyst's current 2010 estimates, below the 12x EV/EBITDA multiple, on average, of his SMID cap universe. The analyst expects weak near term fundamentals, though overall improving business conditions should bode well for DHX heading into 2010.
Currently, DHX is up $0.17 or 2.51% and trading at $6.94.
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by RTT Staff Writer
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