Target Upped on Kenexa

A Hold recommendation has recently been issued to software company Kenexa Corporation (KNXA) by Zacks senior software industry analyst Steve Biggs, CFA. Here's what his latest update said:

'We believe that Kenexa is struggling from competitive pressures, its integration of BrassRing, and a weakening market for talent acquisition. Although it may be too early to gauge the level of top-line synergies from the acquisition of BrassRing, KNXA clearly has more ground to make up on its chief rival Taleo (TLEO). Since reporting disappointing Q3 results with weak guidance, KNXA has initiated a share repurchase and raised revenue guidance for 2008.

'After a 40% sell-off following Kenexa's Q3 earnings release, the stock price has begun to recover, boosted by its stock buyback. The company is trading at 13.8x our current year 2008 EPS estimates of $1.40, a discount to all but one of its competitors. Although the price decline may have been overly drastic, we are concerned that disappointments are not over. We do believe that KNXA shares should trade at a discount to better positioned companies, such as Taleo, which we view as the industry leader.

'We, therefore, set a new six-month price target of $20, which results in a P/E of 14.2x 2008 estimates, still a discount to the peer group. On a P/S basis, KNXA is trading at 1.4x 2008 revenue, compared to an industry median of 1.8. We, therefore, raise revenue and EPS estimates for 2008, on slightly lower-than-expected margins. We reiterate our Hold rating.' 

Keep STMicroelectronics a Hold

Zacks semiconductor analyst John Nelson Simon has followed in the footsteps of Robert J. Perry, CFA and continued to maintain a neutral stance on STMicroelectronics N.V. (STM), the Geneva-based electronics company:

'STM continues to upgrade products and forge strategic alliances in order to fuel long term growth. The company reported an in-line 2007 third quarter, driven by stellar performances from its ASP and IMS groups. However, we still expect that the strengthening euro will ultimately lead to margin weakness, even as the company continues to cut costs. The restructuring of its manufacturing facilities - through the opening of its Chinese facility as well as the initiation of a partnership with IBM (IBM) - may enable the company to save on R&D spending, which could help alleviate some cost pressures.

'The company is well-positioned in the wireless market with respect to its competitors. The results of the third quarter were more in-line with our estimates, although the company is making strides in improving its cost structure even as the dollar continues to weaken against the euro. The availability of a common platform for integrated Digital TV (iDTV) sets worldwide will open up a new market for STM as it integrates digital and analog broadcasting into a single chip.