Shares of data backup software provider Carbonite (CARB), which went public last month, are up $1.04, over 8%, at $13.77 this morning after the six underwriters initiated coverage of the stock, all with Buy or the equivalent rating.
Merrill Lynch, JP Morgan, William Blair & Co., Canaccord Genuity, Oppenheimer & Co., and Pacific Crest took the company public on August 11th at a price of $11, which at the time was below what had been the expected $15 to $17 range. The shares closed up that day, however, at $12.35.
The company’s software is geared toward small and medium businesses, and consumers. It works by uploading encrypted copies of files to the “Carbonite Personal Cloud,” a hosted storage vault. The software works through a Web browser, but also through dedicated programs for Apple’s (AAPL) iPhone, Research in Motion’s (RIMM) BlackBerry, and phones using Google’s (GOOG) “Android” software.
Canaccord’s Richard Davis, assigning a Buy rating, and a $16 price target, writes that the company should be able to exploit the increasing complexity of securing valuable content on a myriad of devices.
“This is one of those classic markets where there is a low probability of a very bad event occurring,” he writes. “With the proliferation of smart phones, tablets, and game consoles, content has exploded into multiple venues �C where it can disappear in a flash of hardware failure.”
Davis expects the company to lose $1.11 per share this year on revenue of $58.4 million, and projects a 78-cent net loss next year on revenue of 82.2 million. Carbonite loses money for the first 18 months of each new customer subscription, he notes.
His price target is a multiple of 4 times the enterprise value versus calendar 201! 2 revenu e, a “slight premium” to the “software-as-a-service” market.
Pacific Crest’s Rob Owens starts the stock at Outperform as well, and a price target of $18. ?His valuation is a multiple of 3.5 times the enterprise value versus the 2012 projected “billings.”
Again, the proliferation of devices and content means the company has “a massive growth opportunity for its core backup offerings and incremental offerings,” he writes.
Owens projects a loss of $1.11 on $58.8 million this year, and 77-cent loss on $82.6 million next year.
Owens sees the company turning a corner in cash flow next year. He notes that in year two and onward, each new subscriber goes from a negative cash flow of $26 to positive cash flow of $44 as marketing and capital costs drop sharply.
As a result, the company will have negative $9.65 million in cash flow this year, but will hit break-even on a free cash flow basis next year.
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