Analysts Tal Liani and Stanley Kovler commented that the upgrade was based on three factors, one being the trend of consolidation among carriers, which could boost Amdocs' results beyond current expectations.
The second was the investment bank's professed growing confidence that Amdocs' operating margin will reach 20% by the year 2007.
The third: "We view Amdocs as a major beneficiary of the current arms-race between the telecom carriers and cable operators. We believe Amdocs is one of the better ways for investors to play the IPTC investment cycle," the bank continues.
Arms race? The point here, the investment bank explains, is that Amdocs is fighting on both sides. It is working on a billing system for Internet-powered television signals (IPTV) and has in fact started a pilot at AT&T. Also, buying DST positioned it to grow in the arch-rival cable sector, with its traditional billing and customer-relations management systems.
Its new price target is based on estimated earnings per share of $2.10 in 2007, and Amdocs' historical price/earnings ratio of 20.5.