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UPDATE - UBS Downgraded Sourcefire (FIRE) to Neutral; Valuation Call; Still Appealing M&A Target

February 24, 2012 1:30 PM EST Send to a Friend
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Price: $75.96 --0%

Rating Summary:
    4 Buy, 16 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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UPDATE - UBS downgraded Sourcefire (NASDAQ: FIRE) from Buy to Neutral. PT unchanged at $46.

UBS analyst said, "With the stock hitting our price target we are downgrading the stock to Neutral on valuation. Stock is +42% YTD (vs. NASD +13%) and now trades at 6.0x FY12E EV/sales, near historical security M&A, and 64x EPS which looks full (PEG 3.4). We believe the 26% spike in the shares post FQ4 results was in large part short-covering, as the stock has significant short-interest (5.76M shares, 23.4% float, 14 day short interest ratio as of 1/31/12). Given that we maintain our $46 PT, we may revisit our views on the stock should this short covering exhaust itself
leaving the shares at a more attractive valuation."

"Product Expansion Increases Appeal as M&A Target: Security industry is rapidly consolidating and FIRE’s soup-to-nuts network-to-endpoint enterprise security portfolio and bite-sized EV of $1.2B should appeal to large potential acquirers looking to build out their security stack like IBM (NYSE: IBM), HP (NYSE: HPQ), Oracle (Nasdaq: ORCL), and Dell (Nasdaq: DELL). Our est’d takeout range is $50-$57 which is 5-6x 2013E EV/Sales."

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