Goldman Sachs Sees 40% Upside in Ruckus Wireless (RKUS), Adds to Conviction Buy List

Goldman Sachs upgraded Ruckus Wireless (NYSE: RKUS) from Buy to Conviction Buy with a price target of $16, suggesting upside of 40%. Analyst Doug Clark said he would use its post-earnings pullback as an opportunity to build or add to positions

"Shares are down 14% since a 3Q earnings beat and 4Q guidance bracketed consensus at the high end of its range. Thematically, Ruckus offers direct exposure to the high-growth WiFi market (as the largest remaining pure-play vendor). We also see multiple sources of optionality that could drive upside to both consensus estimate and multiple expansion," said Clark.

Discussing catalysts, he said, "Post 3Q earnings, our positive fundamental view on Ruckus’ competitive landscape and the improving outlook for WiFi end-market growth remains unchanged. Incrementally, we analyze several sources of upside optionality that could drive outperformance: 1) entering the controller-less WiFi market, 2) a pick-up in Service Provider WiFi engagement, particularly at Comcast and Charter, 3) retaining a leadership position in the Wave 2 technology
cycle, 4) partnerships with Juniper and Brocade, and 5) further E-rate funding allocations."

Clark added, "Our analysis suggests that controller-less product launches have driven an average 1% market share gain for WiFi vendors. Among service providers, Comcast announced its intent to establish an MVNO network and Charter plans to embrace WiFi post M&A, which could present large customer opportunities. Operating margin expectations also appear conservative, coming below company guidance for 4Q16."

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For an analyst ratings summary and ratings history on Ruckus Wireless click here. For more ratings news on Ruckus Wireless click here.

Shares of Ruckus Wireless closed at $11.40 yesterday.

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