Nimble Storage Downgraded By Wunderlich On Valuation

In a report published Thursday, Wunderlich analyst Matthew S. Robison downgraded the rating on

from Buy to Hold, while maintaining the price target at $33. Nimble's shares appreciated, closing within 5 percent of the price target, backed by "heightened awareness of acquisition potential, in addition to recognition of continued fundamental execution," analyst Matthew S. Robison said. Nimble's shares surged over 24 percent since the company reported results on May 26. Around half this increase was driven by an announcement by

(rated Hold) of a $5 billion of debt issuance. "Such funds could be used for a Nimble-size acquisition, which at the current price would be about $3 billion, including the effect of options that are not included in share count while the company has negative earnings," Robison wrote. Sales in combination with Cisco servers are the most popular of Nimble Storage SmartStack bundles. Robison estimates that these represent much more than 10 percent of Nimble sales and are growing faster than the rest of the company. While the success indicates that Nimble is complementary to Cisco, it is unclear whether purchasing Nimble would support more overall account control for Cisco. In the report Wunderlich noted, "With insufficient valuation headroom, we can no longer sustain a Buy rating, but in anticipation of continued fundamental execution and not wanting to rule out acquisition prospects, we are recommending that investors continue holding the shares."