DTLK – Initiation of Buy Recommendation

By: ispeculatornew
Date posted: 12.20.2006 (12:00 am) | Write a Comment  (0 Comments)

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DTLK – Datalink (Nasdaq) (Closing Price – $7.10)

Datalink (ticker: DTLK) is a company in a growing industry and has been reporting solid results. Datalink operates as an information storage architect which basically means it helps companies store and protect their data. This is a valuable service to offer because most businesses deal with overwhelming amounts of information that they must keep protected.

Datalink’s quarterly results can be erratic due to the timing and completion of contracts but overall their results are good. For the first nine months of this year Datalink has reported a 32 percent increase in revenues over the prior year. Datalink’s trailing earnings for the last four quarters is $0.47. That would give DTLK a PE of 15 with today’s closing price of $7.1. That is very cheap for a growing company.

Datalink has had quite a run-up in the last year. Its share price has climbed from four dollars to over twelve dollars. However, it has sold off a lot in the last couple of months and I think now is a good time to buy. Datalink has given guidance for earnings of $0.11 to $0.16 next quarter. They usually meet or beat the top end of their guidance so I expect them to have another solid quarter.

The share price of DTLK can be very volatile, especially intraday. If you buy DTLK you should spread out your purchases and use limit orders. I would buy DTLK between $7 and $8 and see what they report next quarter. If they report good results I would hold and see how things play out over the next year.   

Disclosure: I currently own shares of DTLK.

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