Lipman Electronic Engineering Ltd (LPMA) (LPMA)

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Merrill Lynch remains optimistic on Lipman for the year
22.9.2005 | 14:29
Omri Cohen

Investors have been cool on Lipman Electronic Engineering (TASE, Nasdaq: LPMA ) stock, which again failed to stay at $33. But from September 9, that coolness was replaced with an unequivocal frown, on rumors that its third-quarter sales were weaker than expected. By Wednesday the share price had lost 14%.

As June rolled to a close, Lipman warned that second-quarter sales had been lower than the consensus expectation and its stock fell 5%. But analysts soothed the marketplace, and also, its final results were higher than it had warned investors to expect, leading its share price to approach $33 again.

The market might be much less forgiving of a second revenue warning. Merrill Lynch says that another in a row might impair the management's credibility.

In the long run, says the investment bank, its forecast for Lipman remains positive. The analysts repeated a 55% revenue growth expectation for 2005, to $77 million, and a 29% increase in net profit to $40 million.

But they admitted that visibility regarding quarterly results is not clear and they were not sure whether Lipman would meet pro forma estimates of 44 cents per share for the third quarter, or about $12 million, on revenues of $72.2 million.

Based on their optimism for the year, Merrill Lynch repeated a Buy rating for Lipman stock and 12-month price target of $36, which is 31% above its present level. But they cautioned that competition in its sphere has not evaporated and rival Hypercom is becoming more aggressive in its pricing.

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