Canaccord Adams analyst Jeff Rath this morning launched coverage of Sonic Soluitions (SNIC) with a “Speculative Buy” rating and a $12 price target. The stock closed yesterday at $9.37.
Rath notes that the company’s core business – digital video software tools – is 90% of revenue but offers little growth potential. The bet here is on the growth of its CinemaNow video download service.
“The company is in transition from its legacy DVD download and burn and post-production business into an integrated digital media content distribution service provider,” he writes in a research note. Rath says 2010 is “a disruptive year” for the industry “and offers a company such as Sonic the unique opportunity to become a leading integrated solutions provider during the next several years of this transition.” He cautions, though, that user adoption is in the early stages, and the stock has already factored in some of the anticipated upside.
SNIC is up 25 cents, or 2.7%, to $9.62.
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