Infoblox Shares Are Crashing...Is This Research Note To Blame?
- Infoblox Inc (NYSE: BLOX) shares have plunged 15 percent in the last one month, and are trading significantly lower than their 52-week high of $28.03.
- Deutsche Bank’s Vijay Bhagavath downgraded the rating on the company from Hold to Sell, while reducing the price target from $20 to $13.
- Ending of the “-A” refresh cycle, transition to a SaaS model and rising opex trend are reasons for the downgrade, Bhagavath said.
Infoblox is scheduled to report its Q1 FY16 results on November 30. Analyst Vijay Bhagavath expects the company to report in-line or marginally short of the consensus estimates.
Bhagavath noted the reasons for the downgrade and price target revision as:
- The “-A” refresh cycle is expected to wind-down by December – This is currently driving about 10 percent of product growth and is likely to adversely impact product refresh trends in 2016 for the company’s core IP Address Automation portfolio, and up-sell for DNS Security products. “Our checks note that IT buyers have a ~5 year expectation for organic refresh of BLOX’s current-gen portfolio,” the analyst wrote.
- Opex likely to rise in FY16 – Infoblox’s sales and marketing expenses could rise during FY16. This has also been indicated by the company’s outgoing CFO. The opex would rise due to the need to incur opex separately for service contract renewals and for box refresh. “We note an increasing divergence of the box refresh and the maintenance contract renewal time frames,” Bhagavath commented.
- Transition to SaaS could be deflationary – “The gradual transition in sales of IPAM and DNS Security, during 2016, based on a “SaaS” model is deflationary to the +20% consensus FY16 topline growth view,” the Deutsche Bank report stated. This would be due to the trade-off of higher upfront revenue box sales with lower monthly recurring revenues in the SaaS model.
The EPS estimates for FY16 and FY17 have been reduced from -$0.45 to -$0.51 and from -$0.22 to -$0.44, respectively.
Latest Ratings for BLOX
|Oct 2016||Stephens & Co.||Downgrades||Overweight||Equal-weight|
|Sep 2016||Deutsche Bank||Upgrades||Sell||Hold|
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