Cowen Says Infoblox Continues To Present Compelling Risk/Reward Ahead Of Q4 Report

Ahead of the fourth quarter results announcement of Infoblox Inc BLOX on August 31, Cowen analyst Paul Silverstein believes the stock continues to offer compelling risk/reward. The analyst maintains an Outperform rating and price tag of $28 on the company's shares.

For the fourth quarter, the brokerage expects Infoblox to report in-line EPS at the minimum level and possibly better than EPS fueled by increased operating margin. Similarly, the analyst expects the company to deliver revenue either in line or above the Street predictions in the same period.

While Cowen expects the company to report EPS of $0.07 on revenue of $84.2 million, Street analysts have consensus EPS estimates of $0.09 on revenue of $86.6 million.

Related Link: Cowen Thinks Broadcom Estimates Are "Way Too Low," Sees 13% Upside

In a research note to clients, the lead analyst said, "While migration to a subscription based business model may dampen growth during the initial phase of the transition, we continue to see a number of looming prominent long-term growth drivers including security, cloud, IPv6, open stack, and containers. Timing remains a key issue — with the ongoing risk that significant impact may remain too far distant relative to the time horizon of most investors."

The brokerage pointed out that security revenue reached $50 million in the third quarter representing more than 15 percent of its total revenue. In the last four quarters, security revenue witnessed 50 percent year-over-year growth and pointed out its importance in the valuation.

Cowen reached its price target with 4x enterprise value/revenue multiple to its estimate of $346 million for the quarter ending in January next year.

At time of writing, the stock had shed 0.40 percent to $20.14.

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