What happens to a small company when a respected analyst cuts his recommendation for it? The result can be seen in the shake-up that Voltaire (Nasdaq: VOLT) has undergone in the past three days.
On Tuesday, the company, which develops systems and software for high speed communications between enterprise computing resources, reported third quarter results that were perfectly reasonable. At the same time, Merrill Lynch analyst Tal Liani published a review of the company, in which he downgraded his recommendation for it from "Buy" to "Neutral", saying that the share price, which gave the company a market cap of $140 million at the beginning of the week, already discounted expected positive developments. The share immediately started to fall on high volumes, and altogether, Voltaire has fallen 20% this week, to a market cap of some $115 million today.
Liani is the most prominent analyst covering the company. Until last July, Voltaire had a fairly low market cap of $40-60 million, around the amount of its cash. However, things then began to change, with a following wind in the form of an "Outperform" recommendation for the stock from Liani and from RBC analyst Daniel Meron. And so, in six months the company doubled its market cap.
Liani mentions among his considerations that although Voltaire will benefit from demand for its product as the cloud computing trend gathers momentum, it will be profitable only in a another few quarters, because of rising expenditure.
Published by Globes [online], Israel business news - www.globes-online.com - on February 11, 2010
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