Perion Network Ltd. (PERI:US) rallied to a one-month high in New York as the Israeli maker of Internet tools affirmed a record sales forecast six weeks after Google Inc. (GOOG:US) limited use of its search engine in the company’s products.
Shares of Perion, which makes desktop programs for e-mail, photo sharing and web security, jumped 4.2 percent to $10.03 yesterday, the highest level since Feb. 6. Trading volumes were triple the average over the past three months. The Bloomberg Israel-US Equity Index (ISRA25BN) of the most-traded Israeli companies in the U.S. slipped for the first time in seven days, led by Mellanox Technologies Ltd. (MLNX:US)
Chief Executive Officer Josef Mandelbaum said yesterday that Perion is sticking with the $110 million revenue forecast for 2013 issued in January, even after Google halted automatic software downloads Feb. 1. Perion has lost as much as 30 percent this year on concern fewer people will use its products that come packaged with the search engine that the Tel Aviv-based company says accounts for 62 percent of sales.
“There were a lot of questions on investors’ minds whether these policy changes will negatively impact Perion’s revenue,” Jay Srivatsa, an analyst at Chardan Capital Markets LLC who rates the stock buy, said in a phone interview yesterday in New York. “The company addressed that by saying the policy changes have been implemented. The company reassured investors.”
Rules at Google to improve transparency now require users understand a software product by reading the terms and agreeing to them, instead of the product automatically downloading. These policy changes will reduce the number of Perion’s products installed, said Chardan’s Srivatsa.
Perion advanced 4.2 percent to $10.03. Shares traded in Tel Aviv increased 0.3 percent to 36.71 shekels, or the equivalent of $9.94, at 10:33 a.m. in Israel.
Perion’s sales forecast represents an 83 percent increase from last year’s $60.2 million. Fourth-quarter sales (PERI:US) was $21.4 million, doubling from a year ago. It will probably report adjusted income of 33 cents a share for the first quarter, a 50 percent increase from the year-ago period, according to the average estimate of three analysts compiled by Bloomberg.
The contract with Google was extended on Jan. 31 to the end of May. Perion’s CEO Mandelbaum said on the conference call yesterday that he was confident it would be renewed.
One of the biggest risks to Perion is if they “hit a wall” with Google in the future, Daniel Kurnos, an analyst at New York-based Benchmark Co., said in a telephone interview yesterday. Perion announced on Feb. 6 that it entered into a distribution agreement with Bing, the search engine of Microsoft Corp. (MSFT:US), as a way of diversifying its offerings.
“At this point, it’s just a question of how much investors believe management’s story,” said Kurnos, who has a buy rating on Perion shares. “People are shorting the stock on the strength because they continue to disbelieve that the Google deal will get done in May and that management has any true visibility into the impact of the policy changes.”
Perion’s short interest more than doubled between Jan. 31 and Feb. 15, according to data compiled by Markit on Feb. 28, a London-based research firm.
The Bloomberg Israel-US Index added 0.8 percent to 90.77 yesterday, the biggest slump in two weeks. Israel’s benchmark TA-25 Index this morning added 0.3 percent to 1,243.45.
Mellanox slumped 8.8 percent to $59.78 in New York. The shares in Tel Aviv today fell 3.2 percent to 220.4 shekels, the equivalent of $59.67. Chief Financial Officer Jacob Shulman said the Yokneam Elit, Israel-based company’s first-quarter performance will be impacted by “inventory accumulation.”
Elbit Systems Ltd. (ESLT) advanced 2.3 percent to $38.99 after Israel’s largest non-governmental defense company swung to profitability as sales grew even as U.S. and European defense spending declined.
The company reported a quarterly profit of $57.2 million, compared with a loss of $13 million in the year-earlier period when it had a one-time expense, Elbit said.
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