Dougherty Thinks AudioCodes Won Big France Telecom Contract

Rates the battered stock a Buy

Times are getting better for AudioCodes (Nasdaq: AUDC), which lost 33% of its value on Nasdaq during 2005. Since 2006 began, its share price has climbed 17%, not including its gain on Wednesday night.

AudioCodes is also starting to interest equity analysts. Merrill Lynch yesterday added AudioCodes (and Comverse) to its list of tech stock picks and Dougherty & Co gave the stock a Buy rating.

Dougherty & Company's 12-month price target us $13.70, which is 6% above its price on the market.

Merrill Lynch had upgraded AudioCodes to Buy in mid-December 2005 and set its target at $13, which is roughly the level of the stock now.

Chats that Dougherty  analyst Edward Jackson held with two sources not affiliated with the company, he writes, led him to believe that AudioCodes won a contract that everyone has been talking about with France Telecom. Ericsson also won part of the French contract.

Jackson believes the contract, if it exists, will contribute $10  million to sales. It would help relieve Wall Street's concerns about the company's performance, he adds.

He has meanwhile left his forecasts for AudioCodes unchanged. Jackson projects $13 million profit in 2005, rising to $17.1 million in 2006, which would represent 60% growth in the last year and 30% in 2006.

Sales should reach $116.3 million in 2005, up 40% from 2004, and increase 16% in 2006 to $135 million, he estimates.

A month ago Merrill Lynch also estimated that a deal with France Telecom would generate an unamazing $10 million a year, but added that the strategic value of the relationship lay in the recognition of its technology.