(Reuters) - Shares of Shoretel SHOR.O rose nearly 11 percent after JP Morgan upgraded the internet telephony service provider to “overweight” from “underweight” citing potential share gains in a stabilizing enterprise IP voice market.
The brokerage, which set a price target of $8 on the stock, projects the enterprise IP telephony market to grow 3 percent in calendar year 2010 to $6.2 billion following a 25 percent decline in 2009.
“We view employment levels as the key underlying driver of phone system demand,” analyst Steven O’Brien wrote in a note. Declining initial jobless claims is a positive indicator for a turnaround in demand, O’Brien said.
IT managers, who were delaying upgrades to preserve capital, are increasingly seeing the potential for ongoing operating expenses savings as worth the initial investment, he said.
O’Brien said the bankruptcy of Canada’s Nortel further enchances the potential for market share gains as vendors such as Shoretel try to attract some Nortel’s of existing customers.
Shoretel shares were trading up 6.3 percent at $5.91 Thursday on Nasdaq.
Reporting by Mansi Dutta in Bangalore; Editing by Vikram S Subhedar