Solid Equity Residential Pipeline

We maintain our Buy rating on the shares of Equity Residential (EQR). The company continues to raise rents in most markets, which has led to above average revenue and net operating income growth in EQR's portfolio. Nearly all of EQR's top 20 markets reported solid rental rate growth in the 1st quarter.

EQR continues to dispose of assets in lower growth areas to focus on higher growth assets in more supply constrained markets. In addition, EQR's large development pipeline should incrementally add to earnings as projects come on line.

We think multifamily fundamentals will remain strong throughout 2008, a byproduct of the failing housing markets. We would overweight multifamily operators in the current recessionary economic environment.

The company has a strong balance sheet and plenty of liquidity to be active in acquisitions and development. More private developers are having difficulty obtaining financing, which should decrease competition and increase potential yields on acquisitions and developments.

We expect rent growth to continue at a healthy clip across the company's portfolio and shares should recover after a recent sell off. On a 2008 estimated Price/FFO basis, the company trades at a 10% premium to sector averages and now a 10% discount to our calculated net asset value. We set our price target at 17x 2008 estimates or $43.00 per share.

Pervasive SW Gets Only So Far

Pervasive Software Inc. (PVSW) data business is expected to get a boost with the recent release of PSQL Version 10.10, which is already Microsoft (MSFT) certified for Windows Server 2008.

Going forward, management expects to generate revenues around $10 11 million in Q4:08. GAAP EPS is expected between $0.03 and $0.06 while non-GAAP EPS is expected to come around $0.05 0.08. We maintain a Hold rating on the stock.

However, open source software is an emerging trend in the software marketplace which may impact Pervasive's business as interest, demand and use increase in the data segment. Moreover, the market for integration products is also highly competitive and subject to rapid technological changes.

Based on our FY08 EPS estimate of $0.25, PVSW shares currently trade at a P/E of 17.0x. We believe that the stock will likely trade in a range of $4.25 5.50, or from approximately 8.2x to 13.2x FY08 fully taxed earnings plus $2.20 per share in cash, until the new Pervasive SQL product cycle gains traction.

We expect to see expansion in PVSW's gross margins from its current level to around 88% and operating margins should increase as PVSW should be able to keep operating expenses at current levels. We set a reduced target price of $5.00.

Acquisitions Limit Interactive Data

Interactive Data Corporation (IDC) has shown growth in its core Pricing and Reference Data and eSignal businesses, as it successfully adds to its offerings and integrates acquisitions. A healthy cash flow has allowed it to return cash to shareholders and repurchase stock. We believe the company's strong financial position will help it maintain and grow its dividends going forward.

While IDC has shown impressive growth in several of its business units, most of it is from acquisitions, Fixed Income Analytics reported growth of only 0.2% for 2006, and was down 0.1% in 2007. With the credit market struggling and stocks approaching bear market territory, spending on investment tools is likely to be restrained. We therefore maintain our Hold rating on IDC stock.

Shares of Interactive Data are currently trading at 18.9x our 2008 earnings estimate of $1.34. This multiple represents a discount to industry mean and industry median. Though we are encouraged by recent result, we still believe that there is limited upside to the stock at current levels given the company's dependence on acquisitions.

Moreover, we believe its majority ownership by Pearson (PSO) will limit upside to its valuation. We, therefore lower our price target to $26.00, which is based on a multiple of 19.4x 2008 EPS estimate, still a discount to industry mean and median.