DTLK – Buy Recommendation

By: ispeculatornew
Date posted: 12.02.2007 (2:59 pm) | Write a Comment  (0 Comments)

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DTLK – Datalink (Nasdaq) (Closing price on Friday, 11/30/07 – $4.29)

Datalink has had a couple of rough quarters since my initial recommendation but the company returned to profitability last quarter and gave decent guidance for next quarter.

In Q3 of 2007 Datalink reported revenue of 45.9 million and earnings per diluted share of $0.07. Revenues were up sequentially and Datalink reported its first profit since Q4 of 2006.

For the upcoming quarter Datalink gave guidance for revenue between 47 and 52 million and EPS between $0.06 and $0.11. Datalink reported that their backlog was down to 25 million from 30 million in the previous quarter. However, the CEO stated he was “cautiously optimistic that we will see more aggressive storage spending … as many of our customers take advantage of the availability of year end budget dollars”.

Datalink used to consistently beat the high range of their guidance and last quarter they came in a penny shy of the upper range of their guidance. Therefore, I think it’s a good bet that Datalink will produce earnings near the upper range of their guidance next quarter and report another sequential increase in revenues and earnings.

According to Yahoo Finance the average EPS estimate for next year is $0.40. Based on that estimate Datalink has a forward PE of 11 which is very cheap for a tech company.

I think Datalink currently is trading at a nice valuation and is starting to turn things around. I am going to recommend buying some more shares at the current price.

Disclaimer: I have no position in Datalink.

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