Buy Carbonite

By Linda McDonough • December 29, 2016

Carbonite (NSDQ: CARB) is a leading provider of cloud and backup services for consumers and is making big strides in the small to mid-size business markets (SMB). The company’s acquisition of EVault from Seagate Technology last winter was met with skepticism. Yet recent results showcase stronger than expected profitability for this customer set.

Plentiful cash flow from its mature consumer business is funding growth in this fast growing market. Carbonite’s simple yet robust backup service gives small companies flexible pricing and the ability to recover files without IT staff on hand. The EVault business solidifies Carbonite’s product offering for the SMB market and is ramping profitability faster than expected.

Earnings, which have been boosted by the acquisition, are expected to be 58c this year, more than triple 2015’s 17c. After a smaller jump in 2016, growth leaps to 25% in 2018. My target of $23 offers 40% upside from current levels.

Target: $23 Buy up to: $18.50

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Paul Hedgi

02/10/17 ‐ 10:02am ET February 10, 2017 at 10:02am ET

CARB EARNINGS BUY HOLD OR SELL

Linda McDonough

02/10/17 ‐ 11:15am ET February 10, 2017 at 11:15am ET

Paul,
I think this is a good buying opportunity for CARB. The company beat fourth quarter earnings by 2c and slightly raised 2017 estimates. The stock is weak because they lowered first quarter estimates, which pushes earnings out to quarters 2 through 4. Its purchase of Double Take closed a bit later than expected which pushed revenue out. In addition the company will be investing more in sales people and data centers to fuel growth. That said, I will be watching closely for any signs that earnings are pushed out further which would not be acceptable.
Best,
Linda

02/10/17 ‐ 12:05pm ET February 10, 2017 at 12:05pm ET

THANKS

HowieA

06/18/17 ‐ 7:41pm ET June 18, 2017 at 7:41pm ET

Hi Linda – Jim Pearce in Systematic Wealth is recommending a sell on CARB. What is your take now? Thanks, Howie

06/19/17 ‐ 6:43am ET June 19, 2017 at 6:43am ET

Hi Howie,
Systematic Wealth’s trading focus has a much shorter holding period on most stocks than Profit Catalyst so I am not concerned that we still hold the stock. We are up almost 29% in Carbonite, which I recommended last December. As the stock is close to my $23 target, I am reviewing estimates to see if I can justify a higher target. If not, I will likely sell the stock if and when it reaches $23.
Best,
Linda

06/19/17 ‐ 7:45am ET June 19, 2017 at 7:45am ET

I’m with you. As always, I thank you for your prompt and thoughtful analysis. Howie

Thomas Browne

06/19/17 ‐ 1:00pm ET June 19, 2017 at 1:00pm ET

Hi Linda:
I just sold my CARB at 23.25, for a blended 30% return in 5 months. Another awesome return.
Maybe I sold too early (as I did with PI), but you will never go broke taking a profit.
Many Thanks, Tom

Rick

06/19/17 ‐ 1:34pm ET June 19, 2017 at 1:34pm ET

Congrats. I agree 100%. I had some Sept calls at $20 that I sold this morning also.

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