on Friday, pulling shares lower and ignoring several bullish analyst reaffirmations.
Shares of Mentor fell to seven-month lows -- at $14.21 -- after the company's
first-quarter earnings report late Thursday delivered a mixed bag for investors.
Mentor's first-quarter earnings and revenue beat analysts' expectations, but the company said it was expecting second-quarter earnings before items of 8 cents to 10 cents a share. Analysts had expected 11 cents a share.
columnist Bob Faulkner talked down the stock Friday morning, noting that the company had tinkered with the start date for its fiscal year. "If you do the math, it looks like revenue for the three months ended March '07 was down 11% from last year," he wrote.
But analysts at Canaccord Adams and Deutsche Bank analysts called the company's revenue and earnings guidance for fiscal 2008 "conservative," basing their outlook on contract renewals and bookings.
Canaccord Adams' Dennis Wassung Jr. and Chip Moore noted that about 85% of Mentor's customer renewal pipeline is scheduled for the second half of the current fiscal year. They reaffirmed their buy rating and target price of $23.
Deutsche Bank analyst Tim Fox noted the fiscal 2009 customer renewal base will be 70% larger than 2008's, creating "ample opportunity for early renewals" in the fourth quarter, ahead of contract expirations.
Mentor has invested heavily in the largely untapped automotive sector, Fox stated. "Auto comprises just 10% of bookings today and has the potential to be a significant contributor over time."
JPMorgan analyst Sterling Auty was more cautious, however. He suggested "the renewal cycle that fueled growth last year has reached its peak."
Needham analysts Richard Valera and Andrew Spinola reiterated their buy rating Friday, while trimming their target price to $19.