Applied Signal shares get boost from upgrade

NEW YORK

Shares of Applied Signal Technology Inc. climbed Monday after an analyst upgraded the manufacturer of intelligence and surveillance products, saying it is trading at a "compelling" value.

Brian Gesuale of Raymond James Global Research upgraded the company to "Outperform" from "Market Perform," with a target price of $23.50.

The analyst said the stock's valuation is at "trough levels." On Monday afternoon, the company's shares rose 83 cents, or 4.5 percent, to $19.30. The shares have traded in a 52-week range of $17.22 and $26.92.

In addition, Gesuale said a close competitor, Argon ST Inc., will be acquired and should serve as a boost to Applied Signal. Argon makes electronic systems for the U.S. Navy and other government customers.

A buyout of Argon would follow recent takeouts of similar companies, such as Axsys Technologies Inc., which was bought by a unit of General Dynamics Corp. for $643 million last fall.

"Besides the valuation disparity between (Applied Signal) and the (acquired companies), there is a true scarcity of pure-play intelligence names in the public markets," the analyst said.

"We believe money flow will favor the remaining stocks and Applied Signal is the most obvious Argon comparison," he added.

Applied Signal plans to report its first-quarter results Tuesday after the market closes.