FBR Says 'Moving To The Sidelines On EMC,' Downgrades

In a report published Monday, FBR Capital Markets analyst Daniel H Ives downgraded the rating on EMC Corporation EMC from Outperform to Market Perform, while reducing the price target from $31 to $28, citing the company's weakening fundamentals. EMC develops, delivers, and supports information infrastructure technologies and solutions. The company's main storage business has shown inconsistent performance over the past few quarters making investors wary of the expected benefits from its federation of offerings. "While we believe potential activism could put a floor on EMC shares and ultimately enhance shareholder value over time (e.g., VMware spin-off, M&A path, etc.), we find it hard to remain positive on the EMC story, given our expectation for lackluster growth prospects in 2H15/ FY16," analyst Daniel H Ives mentioned. EMC's recent acquisition of Virtustream is a strategic move, but its choppy execution and no change in the former's overall corporate structure indicate little potential for enhanced shareholder value. In the report FBR Capital Markets noted, "Although EMC's large buyback and strong focus on new product areas (AirWatch, NSX, Pivotal, ViPR, ScaleIO, etc.) could offer investors some respite in light of choppy results over the past year, we believe the company will need more M&A to help find its next growth act, as its core business remains very mature and may have inherent challenges ahead." The EPS estimates for 2Q15 and FY15 have been reduced from $0.44 to $0.41 and from $1.98 to $1.90, respectively, to reflect currency headwinds and the recent execution issues.
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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsFBR Capital Markets
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