The Benchmark Company Upgrades Terremark Worldwide to Buy (TMRK)

The Benchmark Company is out with a research report this morning, where it upgrades shares of Terremark Worldwide Inc. TMRK to Buy, from Hold; it has a $9.00 price target on the stock, up from $8.50. The Benchmark analysts cited three key points for the positive view on the stock: 1. Colocation and hosting are highly predictable businesses. Roughly 90% of Terremark’s revenue is from recurring contracts, which should ensure solid performance even as the economy slows. 2. Recurring contracts, low churn and new customer wins should result in consistent growth. During FY1Q11, Terremark’s bookings were up 100% y/y. Recent wins give solid visibility to a strong fiscal 2H11. 3. Terremark’s monthly churn stands at 1% and 20% of Terremark’s total revenue is from federal contracts, which had zero churn last quarter. Federal datacenter consolidation is likely to contribute to sustained growth. In addition, Terremark’s relationship with the federal government has helped it attract civilian government contracts, such as the recent Verizon deal. The analysts also increased their estimates on the name. As for valuation, the analysts remarked, “Terremark is valued at 10x FY2011E and 8x FY2012E operating income before depreciation and amortization (OIBDA or EBITDA). Our $9 per share price target equates to 11x FY2011E and 9x FY2012E OIBDA, within Terremark’s recent trading range.”