U.S. investment bankers are making soothing noises over business prospects in Israel, even as ethnic bloodshed intensifies.
Gary Weiss, the head of
European technology and investment banking division, told TheMarker.com yesterday that his company should keep in touch with Israel's startups especially at this time of intensifying insecurity and trouble. Jerry Mandel, the head of the bank¿s Israel desk, believes the market will pick up next year, and that Israeli issues can be planned for the first half of 2001.
Salomon Smith Barney
hastened to say that a 20% drop in data security company
Check Point Software Technologies
is a one-time thing.
No need to worry, Solly soothed fretting investors: On the contrary. "A combination of valuation compression (that the market is experiencing), Palestinian concerns (which should not affect the company) and breaking its 200 day moving average all probably contributed to the decline," wrote analyst Chuck Jones. "We believe business remains very strong."
Jones says Check Point trades at 94 times his expected earnings per share for 2000, and at 61 times predicted earnings for 2001. He predicts that Check Point revenue will grow 50% over the next two to three years, with EPS of $1.20 this year and $1.85 next year. He reiterated his high-risk buy recommendation and set a price target of $225, double Check Point¿s current price.
As for the future, Merrill's Weiss is making the rounds of Israeli technology companies that are, he says, nine to 24 months before an initial public offering. He is visiting Merrill¿s new offices in Tel Aviv.
One of its Israeli successes is
Precise Software Solutions
, which Merrill led to market week, raising $500 million.
But in general, Weiss seen no real revival in
IPOs until spring, including issues Merrill had planned for late this year.
One candidate is
, which develops software to optimize computer resources in organizations, mainly for e-commerce. Another is
, which Jerry Mandel, the head of Merrill Lynch¿s Israel technology desk, says was about to complete its IPO when the market began to collapse.
Mandel says investors now want not only a product but a star-studded list of customers and a stable business model as well, with dot-coms generally beyond the pale. Valuations in telecom equipment are also extravagant, he warns.
Weiss and Mandel agree that Israeli startups will find backing from local venture capital funds. Valuations may drop, but mezzanine rounds ahead of public issues will pick up, they predict. as will the trend of mergers and acquisitions.
As for Check Point, at a market value of $19.8 billion, it's the most valuable Israeli company traded overseas. Of the 5,000 companies listed on the
Nasdaq Composite Index, Check Point is No. 3 in dollar-trade volume on the international list, behind
, which recently moved to the Big Board.
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