IT security company Vasco Data Security ( VDSI) shares hit the brakes as the stock has lost more than 12% in the two days since it hit its 52-week high, largely because of profit taking and questions about potential upside. Vasco, which makes online security authentication products, has been one of the fastest-growing IT security stocks. The stock moved up 48% in three months since Oct. 23, and nearly 71% in a year, to touch its high of $15.84 on Jan. 17. But a downgrade over valuation issues and turbulence among technology stocks seems to have put an end to
its winning streak. "The market's down, and tech is generally weak at the moment, but there has been no change in fundamentals for Vasco," said Frederick Ziegel, an analyst with Soleil Mackinac Research, which does not have a banking relationship with or own shares of Vasco. Ziegel has a buy rating on the stock with a price target of $20. Shares of Vasco were down 63 cents or 4.34% to $13.89 in late-afternoon trading. One reason for the slide could be that the stock's too expensive now, suggested a report from ThinkEquity Partners. ThinkEquity downgraded the stock to accumulate from a buy rating on Friday. "Online authentication is one of the fastest-growing areas of security, and Vasco is the best way to get exposure to the growth," wrote analyst Ranjini Chandirakanthan in a research note. "Nevertheless, we believe that the 12-month valuation upside opportunity has diminished." ThinkEquity makes a market in Vasco shares.
Still, there are a few catalysts left that could revive interest in Vasco over the next few weeks, suggested Ziegel. eBay's ( EBAY) earnings call on Jan. 24 could hold some good news for Vasco. eBay plans to offer PayPal users security tokens in a bid to strengthen the security of its payment service, and Vasco's authentication-token product is likely to be introduced as part of that service. An update on that could boost Vasco's stock, says Ziegel. Vasco's Jan. 31 analyst day could lead to some positive sentiment. The company is likely to report is fourth-quarter fiscal 2006 earnings next month. Street expectations are for revenue of $25.72 million and earnings of 11 cents a share, according to a consensus of First Call analysts.