FBN Securities reiterated Sector Perform on Brocade Communications BRCD. At the same time, FBN left its Price Target unchanged at $6.50.
In a research report published today, Wunderlich stated, "We retain our
Sector Perform rating and $6.50 price target on BRCD
after yesterday's FQ2 report. At first glance, we were
impressed: NG EPS of $.13 beat consensus by $.03, the
SAN business (where most of the value is) grew 14%
Y/Y (flattish Q/Q) in its seasonally weakest quarter as
HDS contributed to growth, and the Ethernet gross
margin grew from 47% to 51% (approaching its target
of 54-59%), and net debt was reduced again (to $394M
from $503M in FQ1 and $725M a year before)."
In spite of strong quarterly performance, Wunderlich remains concerned about the sector's long term outlook. The report states, "the outlook for SAN growth of 5% Y/Y
implies roughly a 5% Q/Q decline (unusual) even
though 16Gbps directors to EMC just started shipping
and even though BRCD's SAN revenue usually grows
Q/Q in FQ3. It is true that BRCD has a difficult Q/Q
comparison. We expect the SAN business to rebound
in FQ4 due to seasonality and 16Gbps ramping."
In today's trading, Brocade lost 1.94% and is currently standing at $6.54.
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Posted In: Analyst ColorAnalyst Ratingsbrocade communicationsCommunications EquipmentFBN SecuritiesInformation Technology
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