We are revising our 1 yr price target from 150 to 250. Key reasons are a strengthening market sentiment, a striking valuation discount with its peers and our perception of less execution risk.
Using a demanding required-revenue model, CLRS requires only a 77% 5 year (1999-2005)annualized revenue growth to support the new price target--vs. 124%(ARBA), 132%(CMRC) and 98%(FMKT).
In terms of simple valuation (market cap to revenue (2000E), CLRS trades 37X vs 189X(ARBA), 152X(CMRC) and 130X(FMKT).
Assuming a 30% return, our new price target of 250 implies an imediate price target of 175. Even with that price, CLRS shares would only recover a small portion of the valuation gap indicated by the multiples.