Friday, FBR Capital Markets initiated coverage of Vocus Inc. (VOCS) stock with an Outperform rating and a price target of $22.
Analyst David Hilal based his Outperform rating on Vocus' dominant competitive position, the company's growth initiatives, a stabilizing economic environment, and an inexpensive valuation and attractive entry point.
The analyst believes that, in addition to building a dominant position in the public relations automation market, Vocus is making the right moves to increase market share and that the business likely bottomed in first half of 2009.
The analyst also believes that the company's investments in expanding and upgrading its sales force and broadening its global footprint are the necessary catalysts that should mark this past quarter as the inflection point in bookings growth, expecting a slow but steady bookings growth rebound.
Although the company's exposure to the small and mid-sized business market and to declining public relations and marketing budgets has pressured the business during this downturn, the analyst believes that the stabilizing environment and thawing of budgets should lessen this pressure.
The analyst's price target of $22 represents 28x his 2011 pro forma EPS estimate and a premium PEG of 1.4x. The analyst assigned a premium valuation to VOCS due to the company's market leadership and strong cash flow generating capability.
Currently, VOCS is up $1.22 or 6.59% and trading at $19.74.
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