Itron Inc. (NASDAQ:ITRI) is being defended by Lazard Capital Markets after the stock’s recent weakness. Analyst Sanjay Shrestha at Lazard is reiterating/maintaining his BUY Rating on Itron with a $115 price target.
Shrestha notes, "We believe the current levels represent a very attractive risk/reward. The shares have pulled back meaningfully after 3Q07 results. We continue to believe that Itron is well positioned to deliver stable growth from its core AMR and meter business with potential for meaningful upside from the rollout of AMI projects…. Our recent checks suggest that several large-scale AMI projects are still on track to move forward over the next several months with potential for some projects to be announced before year end."
Srestha notes that there are risks such as lumpy sales and meaningful revenues might not be seen until late in 2008 with meaningful contributions not seen until 2009 and beyond.
"Our $115 price target reflects a 25x multiple on our 2009E EPS of $4.60. This multiple is essentially in line with ITRI’s peer group. We believe that, if anything, ITRI should trade at a premium to its peers given its leadership position and increasing visibility on movement of several large-scale AMI projects…. At current levels, we see limited downside risk given that the shares are trading at about 15x FCF/share of about $5.00 in 2009E."
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As Itron is one of the solid-state and automated meter reading plays, we regularly watch this one as a beneficiary of clean energy and dirty energy alike. It is also one of the ongoing plays for the upgrades needed for the entire US power grid(s) upgrade cycle over the coming decade. Itron shares are up 0.9% on thin volume at $78.59, and the 52-week trading range is $47.23 to $112.92.
Jon C. Ogg
November 30, 2007