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Soapstone Still Fails to Impress
Soapstone Networks Inc. (SOAP - Analyst Report) previously known as Avici Systems (AVCI) changed its name to reflect its focus on developing and marketing virtual Service Control Plane solutions. Although strong end-of-life router sales drove better-than-expected revenue and a higher cash balance towards the end of 2007, our long-term outlook for SOAP remains unchanged.
We believe Soapstone offers a unique product and are encouraged that it has entered beta testing, however there is a lot of uncertainty surrounding forward revenues. As such, we maintain a Sell rating on the shares with a six-month target price of $6.50.
Without meaningful current revenues and limited visibility into future revenue, our price target on SOAP is based on the company's cash balance. We estimate that Soapstone will have $91 million in cash & equivalents in six months, or $6.12 per share.
Given that a company in the early stages that Soapstone is in, we believe a call option would still be worth very little. We therefore retain a Sell rating on the shares and set a price target of $6.50, which is approximately the value of cash and long-term investments on hand and $0.38 for the Soapstone business.
Read the full analyst report on SOAP.
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| Market Summary | Jul 31, 2010 13:11 pm ET |
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