UPDATE: Wedbush Upgrades Extreme Networks Following Enterasys Acquisition

In a report published Tuesday, Wedbush analyst Rohit Chopra upgraded the rating on Extreme Networks EXTR from Neutral to Outperform, and raised the price target from $4.00 to $6.00. In the report, Wedbush noted, “We are upgrading Extreme Networks to OUTPERFORM from NEUTRAL based on our view that the acquisition of Enterasys is immediately accretive and offers potential upside from synergies, leading to valuation which suggests upside from current levels. Our upgrade is predicated on our belief that (1) the deal is immediately accretive, given similar financial profile, leading to valuation which implies upside from current levels; (2) we think the company will benefit from deal synergies, including optimization of the supply chain and the removal of duplicate cost structures; (3) increased share and a broadened portfolio should allow Extreme to compete more effectively with larger competitors and eventually offer greater capabilities. We note, however, that the company has delivered inconsistent results and has limited acquisition experience, which introduces significant integration risk. Valuation is currently compelling at ~0.7x 2014 sales, below the networking group average of ~3.0x. We believe small-cap value investors with a long-term time horizon, should own the shares.” Extreme Networks closed on Monday at $4.37.