Skip to main content

Market Overview

Wunderlich Downgrades Brocade, Spooked By Guidance Warning

Share:

Brocade Communications Systems, Inc. (NASDAQ: BRCD) announced that its F2Q16 sales could would likely miss expectations, especially for Fibre Channel [FC] storage area networking [SAN]. Wunderlich’s Matthew S. Robison downgraded the rating for the company from Buy to Hold, while reducing the price target from $10.50 to $9.00. The analyst commented that Brocade’s organic recovery could still be a couple of quarters away.

Brocade said non-GAAP EPS was now expected to be $0.21-$0.23 on revenue of $518-$528 million, down from its earlier guidance was $0.22-$0.24 and $542-$562 million, respectively. Analyst Matthew Robison mentioned that the shortfall was on account of FC SAN and that the “warning looks like economic slowdown.”

“Brocade also saw weakness in service provider and federal for Ethernet,” Robison wrote. He added that Ruckus Wireless Inc (NYSE: RKUS), which is being acquired by Brocade, recorded 1Q16 non-GAAP EPS and revenue ahead of expectations.

Concern Related To Product Cycles

Although significant product cycles are underway, they may not contribute significantly to results until FY17. “With OEM channel inventory down, we were encouraged to view the upcoming Gen6 Fibre Channel upgrade cycle as something to invest in rather than wait for. We have changed our mind,” Robison commented.

He added that it could be late summer before Gen6 was fully qualified by major OEMs, and there was lack of clarity related to how successful the company’s IP Fabric switch would be at serving demand for non-FC SAN.

Latest Ratings for BRCD

DateFirmActionFromTo
Nov 2016WunderlichDowngradesBuyHold
Nov 2016DA DavidsonDowngradesBuyNeutral
Nov 2016RBC CapitalDowngradesOutperformSector Perform

View More Analyst Ratings for BRCD
View the Latest Analyst Ratings

 

Related Articles (BRCD)

View Comments and Join the Discussion!

Posted-In: Matthew S. Robison WunderlichAnalyst Color Downgrades Price Target Analyst Ratings

Latest Ratings

StockFirmActionPT
GIKColliers SecuritiesInitiates Coverage On14.0
SANWLake StreetInitiates Coverage On6.0
LILAMorgan StanleyDowngrades15.0
BEJP MorganUpgrades36.0
NEXACredit SuisseUpgrades11.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com