Strength Continues at NDS Group

NDS Group (NNDS) reported a solid fiscal third quarter of 2008 despite a currency headwind, and beat our revenue estimate handily while slightly exceeding our earnings estimate. Continued strength in conditional access, gaming and DVR technologies, as well as new deals in emerging markets helped drive revenues and growth.

We have maintained our revenue and earnings estimates for 2008 and 2009 and expect the company to continue to expand in emerging markets while adding additional revenue streams in developed markets. We continue to rate shares of NDS a Buy with a target price of $63.00 based on NDS selling between 23.0x 23.2x our new 2008 EPADS estimate of $2.72.

We believe shares of NDS Group should continue to perform well due to our strong outlook for 2008 and 2009. The results for the third quarter were much better than our estimates due to the new technology initiatives, and we expect the company to continue to grow revenues in excess of 18.6%, while growing earnings per share by more than 16.8% for 2008 as the company has now established a presence in several emerging markets and can now begin to leverage its presence in these markets to fuel growth through add-on service revenues.

Udayan Mukherjee contributed to this report.

Read the full analyst report on NNDS.