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Wall Street Eyes Energy Software Giants
Deutsche Banc Alex. Brown analyst Ed Tirello initiated coverage of Caminus Corp. with a Strong Buy rating, predicting that the energy industry's spending on information technology and software would grow significantly in the next few years.
Caminus has developed energy commodity transaction and risk management software for various industries, including the electric and natural gas sectors.
Tirello believes Caminus should benefit from deregulation both in the U.S. and in Europe because developing competitive markets require new information technology. "We predict energy industries' spending on energy software technology to grow by 30-40% per year and we think a large part of this investment will go straight to third-party vendors, as opposed to internal development, because it is a readily available and cost effective alternative."
Tirello believes Caminus' recent merger with Nucleus Corp. created a superpower in the industry by broadening Caminus' products and services offering, while creating opportunities to reduce overhead, cross-sell products and enhance the talent pool at the firm. "With the recent acquisition of Nucleus, we believe the company now offers the premier package of transaction and risk management software," he said.
He expects Caminus' revenues to grow 82% this year and 42% next year with gross profit margins remaining at about 72% in each year. His 12-18 month stock price target is $47. The company's stock jumped 12% yesterday to $43.62/share.
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