We highlighted Data Domain (DDUP) in a prior post a bit over a week ago as being exceptionally timely given the excellent data we were getting through our research sources and the market-driven pull-back in the stock to levels that provides some meaningful upside to our $24 IV estimate.

The stock has held up well during this time and into the earnings last night which reflected strong execution and allowed the company to raise guidance for the year.  The company continues to post powerful growth of over 100%.

We reminded our clients in a recent research report that data de-duplication is the top spending category in enterprise storage but the shares were too expensive at the time to get excited about.

Our IV model has been tweaked a bit post the quarter but doesn’t change our IV number much. We think that our $24 could go up by a couple of dollars but if the stock rallies post quarter we would probably take some profit.

Anywhere below $21 we’d probably get aggressive again assuming our research inputs remain intact.

Tags: Data Domain, DDUP

We’ve been following Data Domain for over a year and it has tended to be too expensive to buy.  Our intrinsic value (IV) estimate has been fairly consistent at $24/share but recent inputs suggest the company may be able to do well enough for us to tweak our model higher and see an IV in the upper-$20′s.

The recent market turmoil has reduced the price to just over $20 which makes this a strong candidate for boosting overall 2008 returns. The shares could easily finish the year up 20% from here.

Our inputs underscore the competitive lead that Data Domain enjoys in the marketplace.  The major competitors like EMC are still over a year behind.  In addition it has proven out to be much more difficult to switch deduplication vendors than most people originally thought, enhancing lock-in.

We published an updated report entitled "Data Domain One Year Later ($)" with more information and to serve as a follow-up from our initial report published when they did their IPO in 2007.  Subscribers received the report in June when DDUP was trading higher meaning there wasn’t a strong stock call at the time.

However at current prices our clients should be more aggressive. The report is also available for purchase at the link above for those wanting more details.

We’ve had many requests to make our reports available on an individual basis and now the Data Domain IPO report is available at Research and Markets.  The direct link is here.

The company has announced that they will be reporting their first quarterly results as a public company on July 31 after the close.  We’ll be on the edges of the summer slowness but at the time we will issue an updated report and new financial estimates.

Since the IPO the shares have been moving hire and are now trading at $28 versus our current estimate of full fair value of $23.  All the incremental data we have collected points to a strong quarter with the possibility that we will be increasing our fair value estimate.  However we doubt it will be going above the current share price. – Kris Tuttle

Tags: Data Domain, Earnings, Research, DDUP

Since we published our short IPO report covering Data Domain on June12, we received more in-depth information from our friends over at TheInfoPro.  Their proprietary report clearly shows strong momentum for Data Domain in the enterprise market.  Although EMC will take a bite out of this market, Data Domain has a very strong position. 

In addition, many were reminded of the still developmental state of the backup and recovery market with the full day database-related outage over at FeedBlitz. Data management remains a complicated and still unsolved problem for most companies. 

Taking all factors into account we would say the company has even better chances of executing well and achieving our fair value estimate of $23/share.  Data Domain would also make a very good acquisition for a number of large industry players.  The mid-point of the current range is $12.50. 

Original Report Summary: Data Domain (DDUP) is showing explosive growth thanks to its ability to leverage indirect distribution channels to exploit demand for more efficient global backup solutions. We viewed the prospectus with some skepticism and have identified some real reservations. However, our long-term valuation model suggests a fair value for the shares of $23. We can’t say for sure whether or not Data Domain will be able to execute on its plan, but for now it is the company’s to lose. Even if it ends up staying in the (SMB) market its plan can work and provide very good growth with sustainable operating margins just over 20%. The offering price discounts complete success into 2008.

The full report is only available to subscribers here.  Non-clients can click here to be walked through a quick purchase and then go right to the report (pdf.)
If you wish to become a paying subscriber but hate going through the process just send an email to support@research2zero.com and we will send you the PDF and handle the payment manually. It won’t be instant but we will process such requests with alacrity. – Kris Tuttle

Tags: Data Domain, EMC, DDUP, IPO Research, Data