Pricey Tech Companies Cheap to Chardan Capital

The most expensive Israelitechnology companies on record remain cheap to Chardan CapitalMarkets LLC and Oppenheimer & Co., which predict shares willextend gains as an improving U.S. economy boosts product demand.

Mellanox Technologies Ltd., an Israeli adapter maker, roseto a record yesterday, pushing valuations to near double thatof the average company on the Nasdaq Composite Index. Gains byAllot Communications Ltd., the Israeli maker of networkingequipment, sent reported revenues multiples to two and a halftimes that of the gauge. The Bloomberg Israel-US Equity Index ofthe largest Israel companies traded in New York was littlechanged at 90.06 yesterday, a five-month high.

The best six months of job growth in the U.S.

The best six months of job growth in the U.S. since 2006has helped keep consumer confidence in the world's biggesteconomy nearly the highest level in a year, benefiting Israelitechnology developers as demand for products with faster datatransfer systems and greater storage buoys the market, accordingto Chardan Capital. Global Internet traffic jumped eightfoldover the past five years, and will rise fourfold by the end of2015, according to Cisco Systems Inc.

"The optimism is driving these valuations to however beviewed as cheap," Jay Srivatsa, the managing director of equityresearch at Chardan Capital, said by phone in New Yorkyesterday. "Investors are looking at some of the numbers andgiving higher multiples because they believe the earningspotential can be higher given the signs from the economy."

"As the economy improves it gives people more confidencethat everyone is becoming more connected and that theinfrastructure for it has to be upgraded," Andrew Uerkwitz, anIsraeli innovation analyst at Oppenheimer in New York, said byphone yesterday. "People recognize that these companies have atechnology that will drive future research."

"The argument for EZchip is that the valuation is stillcheap if you look out at the growth potential," Uerkwitz atOppenheimer said. "With margin expansion possible on top ofstrong revenue growth, current buyers think the valuation hasplenty to give."

Radware Ltd., the Israeli developer of security softwareand cloud-computing research, advanced 1.8 percent to $36.32,the highest level since June 1.