Deutsche Banc Alex. Brown analyst Ed Tirello initiated coverageof Caminus Corp. with a Strong Buy rating, predicting that theenergy industry’s spending on information technology and softwarewould grow significantly in the next few years.
Caminus has developed energy commodity transaction and riskmanagement software for various industries, including the electricand natural gas sectors.
Tirello believes Caminus should benefit from deregulation bothin the U.S. and in Europe because developing competitive marketsrequire new information technology. “We predict energy industries’spending on energy software technology to grow by 30-40% per yearand we think a large part of this investment will go straight tothird-party vendors, as opposed to internal development, because itis 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 toreduce overhead, cross-sell products and enhance the talent pool atthe firm. “With the recent acquisition of Nucleus, we believe thecompany now offers the premier package of transaction and riskmanagement software,” he said.
He expects Caminus’ revenues to grow 82% this year and 42% nextyear with gross profit margins remaining at about 72% in each year.His 12-18 month stock price target is $47. The company’s stockjumped 12% yesterday to $43.62/share.
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