Investment bank Jefferies issued warnings on five technology stocks in its 2011 outlook. The firm said the shares may be trading above their intrinsic fair value. It expects two of them to stagnate and three to drop precipitously in the year ahead. Below, they are ordered by downside potential, from modest to most.
5. Patni Computer Systems (PTI) provides IT services, including application development, maintenance and support, from India. It targets industries, including insurance, manufacturing, retail and utilities, with custom offerings.In the past 12 months, Patni's sales have risen 4%, but net income has soared 41% amid superior pricing. Third-quarter sales rose 6.9%, but profit tumbled 19% to $29 million. Earnings per share dropped 22%, hurt by a larger float. The gross margin narrowed from 41% to 38%. The operating margin fell from 18% to 16%. Patni's stock appears undervalued, costing 10-times trailing earnings, 13-times forward earnings and 9.4-times cash flow, 49%, 27% and 42% industry discounts. But, Jefferies expects a cap on upside. It rates the stock "hold" with a $21 target, suggesting little, if any, upside in 2011. Goldman Sachs is more pessimistic, ranking Patni "sell" and predicting a drop of 18% to $17. In total, two researchers advise purchasing the stock, five say to hold it and one recommends selling. Of note: Patni boasts a net liquidity position (cash minus debt) of nearly $318 million.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV