Target Upped on Kenexa

A Hold recommendation has recently been issued to software company Kenexa Corporation (KNXA - Analyst Report) 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 - Snapshot Report). 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."

Read the full analyst report on KNXA