Wellpoint Looking Well

Reiterating his bullish case for Wellpoint, Inc. (WLP) Zacks health sector analyst Chris Kallos explains why the future looks bright for the health benefits company and suggests that investors should add the name to their portfolio:

'Wellpoint, Inc. is the largest publicly traded commercial health benefits company, and the largest of the Blue Cross Blue Shield (BCBS) plan providers, in terms of membership in the US. The company is scheduled to report 4Q07 financial results on January 23, 2008.

'As the largest of the Blue Cross Blue Shield plan providers in the United States, and therefore, brand recognition amongst the senior population, WLP is well-positioned to benefit from Medicare initiatives such as the introduction of Part D. Success of initiatives such as Tonik amongst young uninsured people bodes well for organic growth in the attractive Californian market.

'We have valued WLP on a forward price/earnings (P/E) basis, as well as through a comparison to similar firms in the 'managed care' sector. Our revised price target of $96 (previously $89) is derived using a P/E multiple of 14.9x our FY08 EPS of $6.43. We retain our Buy recommendation pending the company's earnings release later this month.'

Expect Polycom In-line

Zacks senior telecommunications analyst David Weissman, CFA remains cautious on Polycom, Inc. (PLCM), a leading provider of video and audio conferencing equipment and related network infrastructure, and rates the stock as Hold:

'We maintain our Hold recommendation and the same valuation target for Polycom, as the company will shortly announce its fourth quarter 2007 financial results. The market for online voice/video collaborative solutions remains robust, and Polycom's strong business relationship with a number of large companies provides immense growth potential.

'In addition, the balance sheet of the company is very healthy to support its new ventures. However, the financial outlook for the fourth quarter provided by management remains lackluster, especially when considering the fact that this reporting period usually has been favorable on a historical seasonality basis.

'Polycom is trading at 21.6x our one-year forward earnings estimate. This represents a significant premium to both the S&P 500 and the peer group median. This momentum is likely to continue as part of the strong worldwide demand for Voice- and Video-over-Internet Protocol communications. However, we remain cautious regarding the company's position in the IP video telephony market due to mounting competition and alternative video approaches using the Internet.

'We also remain concerned regarding the gross margin as we expect revenue volatility and new product rollouts in the near future.