Datalink Target $ 17

DTLK : NASDAQ : US$10.87
Target: US$17.00

Datalink provides IT infrastructure and services to medium and
large enterprises. The company’s traditional focus has been
storage consulting, deployment and support. Recognizing the
growing opportunity inherent to data center virtualization,
acquisitions in late 2009 expanded this focus to include servers
and networking. Datalink is headquartered in Eden Prairie, MN
and employs ~300 people across 32 offices in the United States

Semiconductor Devices and Related Technologies
Investment recommendation
Last night, DTLK rewarded investors who trusted in management’s
ability to execute by delivering healthy upside to Q4. We continue to rate
DTLK a BUY ahead of accretive acquisitions and an improving IT
spending backdrop. While details were not provided in the release, we
believe upside for revenue and EPS were likely a combination of the
completion of large deals that slipped from Q3, and a recovery for
product gross margins which had come under pressure from
competitive vendor pricing versus channel partners. We are increasing
our estimates and price target.
Investment highlights
 Datalink revised its DecQ expectations with revenue of $174 million,
above their previously guided range of $160-170 million and Non-
GAAP EPS of $0.33-0.37 vs. prior guidance of $0.24-0.30. This
compared to our estimates of $165M/$0.27 and consensus
estimates of $165M/$0.25. DTLK will report DecQ results after the
close on February 20, 2014.
 In addition to revenue upside, we believe healthy gross margin
drove EPS upside and, as we wrote on our October 22, 2013 note,
revenue guidance was conservative. We expect management is
likely even more focused on making an accretive acquisition in the
near term.
DTLK’s price target of $17 (was $16) is 12x our C2014 EPS estimate of $1.12 plus net cash of $8.20 a share




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