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Liquidity Services (LQDT) PT, Estimates Lifted By Oppenheimer Ahead Of Q2, 'Outperform' Maintained

 April 09, 2012 11:04 AM

Oppenheimer & Co. analyst Jed Kelly raised his price target on shares of Liquidity Services Inc. (NASDAQ:LQDT) to $57 from $43, while maintaining its "Outperform" rating.

Ahead of the company's Q2 results, the brokerage lifted Q2 adjusted EPS estimate to $0.40 from $0.33, Q3 estimate to $0.38 from $0.37, its 2012 estimate to $1.43 from $1.35 and 2013 estimate to $1.70 from $1.62.

Kelly is raising estimates and price target ahead of Q2 results, based on strong monthly GSS data for Commercial and Government deals, and his assumption for continued acquisitions versus share repurchases. As a result, his price target increases to $57 from $43, which assumes 15% upside from current levels.

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Management has a proven track record of completing highly accretive acquisitions. The analyst now estimates Q2 gross merchandise volume (GMV) growth of 49% versus 27% previously, or 30% organic growth, with long-term GMV growth of 28% or 19% organic.

The company's Q2 GMV tracking up 67% versus Kelly's previous 27% estimate. This assumes a 500 basis points discount to the monthly GSS rate of 72%. Commercial up 112% year-over-year, accelerating versus Q1's 71% year-over-year growth.

Government deals up 40% year-over-year, accelerating versus Q1's 19% year-over-year growth. Government liquidation up 16% quarter-to-date, a deceleration versus Q1's 22% year-over-year.

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The analyst raised Q2 GMV to $205 million from $175 million, 17% above the high-end of guidance. He also increased 2012 GMV to $772 million from $733 million, 4% above the high-end of guidance. He also lifted Q2 EBITDA by 18% to $24 million from $21 million, based on an 11.8% current margin (was 11.7%) versus guidance of 11.2%-11.7%.

Kelly expects management to provide 2012 guidance above the Street. Model now assumes acquisitions versus buybacks as primary method of reinvesting excess cash.

Using the company's historical acquisition metrics, the analyst assumes excess cash is spent on acquisitions at an average of 1.2 times NTM GMV. As a result, he now assumes long-term GMV growth of 28% (19% organic), resulting in long-term adjusted EPS growth of 35%.

Liquidity Services is an auction marketplace for surplus and salvage assets. The company enables buyers and sellers to transact in an automated online auction environment offering over 500 product categories.

LQDT is trading up 0.97% at $49.85 on Monday.



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