Morgan Stanley Upgrades Ruckus Wireless

Morgan Stanley issued a report on WiFi Thursday and upgraded Ruckus Wireless Inc RKUS from Underweight to Equal-weight with a price target of $13.

Analysts led by James E. Faucette expected "an in-line quarter from Ruckus as service provider spending, while challenged, has generally remained strong at the customer facing edge, where Ruckus competes."

"We think any upside they could have experienced will likely be muted by currency headwinds from ~50 percent of their sales being from outside the US and denominated in dollars," according to Faucette.

The report noted that "reseller checks identified Ruckus as being particularly price aggressive when bidding for large deals, but relatively quiet otherwise. While this may gain Ruckus some short term share gains and above market revenue growth, we think the company needs to invest further into software in order to support the current valuation and revenue growth expectations."

The report concluded that barriers to achieving the price target include carrier consolidation slowing investment, Wave 2 beamforming standardization hurting its competitive advantage and limited infrastructure budgets for Hotspot 2.0.

Ruckus Wireless Inc recently traded at $12.76, up 1.59 percent.