Fusion Research - Quick Take - Compuware (CPWR) - Defensive Long

8/23/2019 Fusion Research - Quick Take - Compuware (CPWR) - Defensive Long

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Quick Defensive Technology - Long Idea

We would be buyers of CPWR after this pullback, post their negative Q4 pre announcement on April 3 rd. In

January they rejected a $2.3 billion or $11/share takeover offer from activist Elliot advisors. They have since

hired Goldman and Allen as their advisors. There have been other potential bidders floated in the press such as

private equity firms Thoma Bravo, Golden Gate Capital and Apax Partners. Additionally, Bloomberg ran a story

on April 8th that Compuware is in early stage management meetings with private equity suitors. Longtime

chairman Peter Karmanos Jr. retired on March 31st, and in an 8-k filing from October, will remain on as a

consultant for 6 years collecting $600,000 per year. He currently owns 6,135,571 shares. At the current price of

$11.40 I believe the downside is limited and think this is a perfect defensive long idea for this tape. CPWR

officially reports on May 21st and I would not be surprised to see the stock rally into numbers on expectations of

some kind of M&A resolution.

Valuation

In October 2012, RVBD bought APM vendor OPNT at an enterprise value of $921M a competitor to CPWR at

approximately 5x EV/2012 sales. CPWRs APM business run rate is approximately $315M or equivalent to a $1.5B

valuation based on OPNTs price. The Covasint IPO spinout is worth anywhere from $ 400-700m, with an

expected $100M run rate in 2013, growing around 35% year over year. This should happen this summer. This

values the mainframe, services and other business at close to nothing since CPWRs current market cap is $2.3B.

I can justify a $13-14 price target or 2.8-3 x EV/sales.

Please see technical, outlook for CPRW on the next page

Compuware Corp. (CPWR) - NASDAQ $ 11.40Industry Group: Software Market Cap: $2.42 Billiomn Marc Lewis 1 (415) - [email protected]


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Technical Outlook for CPWR

As seen in the chart below CPWR shares are pulled back this AM to its first support level (orange line) near

$11.20 and are bouncing. Additional solid support lies in the $ 10.60 - $ 10.30 area (green band). Resistance

lies near $ 12.62 (red line). The current action looks like a healthy pullback after challenging resistance recently.

We would be scaled buyers here and A secondary supports if shares pull in further. We then see shares testing

the 2001/2002 highs near $ 14.00, which aligns with our valuation thesis.

CPWR - Weekly Chart, through last intraday tick


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Fusion Research - Quick Take - Compuware (CPWR) - Defensive Long