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Merrill downgrades Mercury to intermediate-term Accumulate

Stock has reached high end of its historical valuation range, says analyst

Merrill Lynch said on Wednesday it was cutting its intermediate recommendation for Israeli software testing maker Mercury Interactive (Nasdaq:MERQ) from Buy to Accumulate as the stock has reached the "high end of its historical valuation range".

Mercury's stock has gained almost 50% since the firm announced third quarter results two weeks ago and was "approaching a price level where aggressive upsides moves are likely to be limited", analyst David Parker wrote in a report.

Merrill Lynch said, however, it would retain its long-term Buy recommendation for Mercury since the company remained "an attractive long-term vehicle for investing in enterprise software trends".

Mercury reported a fall of 38% on the third quarter of last year in earnings per share of $0.11 in results released on Tuesday. Sales rose six% to $84 million from last year.

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Mercury's Nasdaq-traded shares closed on Tuesday at $27.46, above its year-low of $18 but well below its year-high of $147.