Polycom: Take Profits, Wedbush Advises

Polycom (PLCM) shares this morning are taking a breather from their recent speculative run, after Wedbush Morgan analyst Rohit Chopra cut his rating on the videoconferencing equipment provider to Neutral from Outperform.

Polycom shares have been on the rise since Cisco (CSCO) last week announced a deal to acquire Polycom rival Tandberg for $3 billion in cash. Clearly, some market players believe that the Cisco deal will trigger someone to take a run at Polycom. But Chopra notes that the stock is up 35% since he upgraded the shares in mid June, and contends that the stock now fully reflects Tandberg’s takeout multiple. Chopra thinks the company will continue to enjoy a leadership position in a consolidating industry, and he says the company could pick up some business from Tandberg while it closes the Cisco deal. But the analyst nonetheless finds that the stock is now fully valued.

Chopra notes that Cisco is buying Tandberg for 10.5x EV/2010 EBITDA, and 19x estimated 2010 EPS. PLCM is already trading at 10x EV/2010 EBITDA, and 20x 2010 EPS. And he notes that Polycom, unlike Tandberg, generates 30% of its business from the voice market, which is less attractive than the video market.

PLCM today is down 73 cents, or 2.7%, to $26.75.