Analyst Ups EMC Estimate, Price Target

EMC, the subject of dueling and conflicting Wall Street reviews in recent weeks, got a bit more positive reinforcement Tuesday when Barclays Capital analyst Ben Reitzes boosted his 2010 profit forecasts from $0.99 a share to $1.05 a share and upped his 12-month price target to $21 a share.

EMC shareholders responded by pushing the stock up $0.50 a share, or 3 percent, to $17.50 in Tuesday afternoon trading.

Reitzes, who previous pegged the stock for an $18 a share peak in the next year, said the storage software company is primed to benefit from stronger demand in the financial services industry and increased demand for its high-end V-Max storage array.

“Our checks indicate that EMC is benefiting from a new product cycle and stronger storage demand in general,” he wrote in Tuesday’s research note.

Two weeks ago, Piper Jaffray analyst Troy Jensen downgraded EMC shares from an “overweight” rating to “neutral,” largely because the stock has surged more than 36 percent since early July and isn’t likely to see the kind of growth—particularly in Europe—that would justify such a lofty valuation.

“We remain upbeat with respect to the pent-up demand for storage, but believe this demand increase is already priced into EMC’s shares,” Jensen wrote in a research note. He added that the stock probably won’t exceed analysts’ expectations in the near-term due to its 31 percent exposure to what’s lately been a very weak European market and “already healthy expectations” for the fourth quarter.

Meanwhile, JMP Securities’ Samuel Wilson initiated coverage of EMC shares with a “market outperform” rating—the equivalent of a “buy” recommendation at other brokerage firms.

In a research note announcing the new coverage, Wilson said EMC stands to benefit from by virtue of its stake in virtualization software vendor VMware which he says are “driving a significant portion of current enterprise IT spending [decisions].” Also, Wilson likes its recent acquisitions and says the company offers a “compelling sum-of-the-parts” valuation” that has been “systematically undervalued” by the market.

Last quarter, EMC topped analyst estimates when it posted a profit of $210 million, or $0.18 a share, on sales of $3.26 billion.

Analysts, many of whom are concerned by declining storage software sales worldwide, are project a profit of $0.21 a share in the third quarter on sales of $3.43 billion.

Twenty-two of the 34 analysts tracking EMC shares rate it either a “buy” or “strong buy” with 12 maintaining a “hold” rating and one analyst advising clients to sell the stock.

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