J.P. Morgan Reducing Estimates On CSG Systems (CSGS)

J.P.Morgan Chase & Co is reducing its earnings estimates for CSG Systems CSGS. It has a Neutral rating on the stock and a $23.50 price target. In the report, J.P. Morgan writes, "We believe we were a bit aggressive in the ability for the company to grow margins given the benefits from the data center transition is a 2010 event. The data center will be transitioned we estimate by the end of 3Q10. We continue to give the company 90BP of margin expansion from 2010 to 2011 but this results in lowering our estimates by $0.02 to $2.43. CSG is a mature business model so we believe P/E and cash flow metrics are the best way to value the company. On both of these metrics the company is trading at a discount to its peers, but we believe that is mainly because of the single-digit organic growth. If that were to accelerate with the emergence of providing solutions outside the core cable and DBS industry, the multiples should converge. We believe at this point Amdocs represents the best peer comparison because of the fact that it too serves a number of cable and DBS customers and has 40% of its business in an outsourced or hosted structure."