Wachovia Securities Analyst Comments on Brocade (Nasdaq: BRCD); Shares Rebound in Early Trading

May 15, 2008 11:23 AM EDT

Comments from Wachovia Securities analyst on Brocade (Nasdaq: BRCD)

"While we continue to consider BRCD's valuation as compelling for long-term investors - especially following what has been the development of a very healthy and apparently stable operating model - we are maintaining our Market Perform rating as we believe shares could pull back or remain range bound over the coming months. Shares have rallied over the past month, likely lending itself to some modest downside pressure given a slightly more tempered outlook. We do believe investors should monitor BRCD as a story to own at some point looking into CH2 2008."

Positives - (1) Solid FQ2'08 results on many fronts (2) Poised to benefit from 8Gbps fabric switch rollout into 2H'FY08, (3) Increasingly positive on HBA opportunity looking into FY2009 and (4) Well positioned director-class product cycle for IBM mainframe refresh looking into 2H'CY08.

Concerns - (1) Tempered Outlook - as previewed, BRCD guiding rev. to be flat to -3% seq. (believe this puts some pressure on shares following recent solid performance), (2) Organic growth - w/a ~$40MM services acquisition completed in qtr, some could question organic rev. growth and (3) Incremental macro pressures.

Yesterday, shares of BRCD closed at $8.02, but opened at $7.50 this morning (a dip of over 6%). However, investors has seen this as a buying opportunity because shares have rebounded and we briefly in positive territory. Right now, shares are down $0.12 (-1.87%).

Brocade Communications Systems, Inc. (Brocade) is a supplier of storage area network equipment and a provider of data center networking solutions that help enterprises connect and manage their information.[SM]

Related Categories

Analyst Comments

Stocks Mentioned

Related Entities

• Wachovia

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?