CSG Shares Sharply Higher After Analyst Upgrade

UNDATED (AP) — Shares of CSG Systems International Inc. were sharply higher Wednesday after an analyst upgraded the stock citing his view that business risks related to two major clients already have been priced into the shares.

Wedbush Morgan analyst Scott Sutherland upgraded CSG to "hold" from "sell," noting that risks to its contracts with Comcast Corp. and Dish Network Corp. remain but already are reflected in the stock's 29 percent decline year-to-date. In contrast, the Nasdaq composite index is down 10 percent.

He also based his upgrade on CSG's improved relations with Charter Communications Inc. and Time Warner Cable Inc., as well as its diversification of products. Englewood, Colo.-based CSG provides software and services that manage customer service for cable and satellite TV companies.

Comcast and Dish comprised 43 percent of CSG's fourth-quarter revenue. Comcast slowly has been moving business away from CSG while Dish is looking at alternatives, the analyst said in a research note published Wednesday.

But CSG will gain more business from Charter starting in late 2009 and it also stands to gain market share with Time Warner Cable. Those two made up 22 percent of CSG's fourth-quarter revenue.

Factoring in the negative events and other expectations, such as lower gross and operating margins, Sutherland pegged the stock's valuation at $10 in a downside scenario. He kept his 12-month price target at $13.

Shares of CSG Systems rose 90 cents, or 7 percent, to $13.76 in afternoon trading.