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Goldman Sachs Upgrades Gigamon (GIMO) to Buy, Sees 36% Upside

January 31, 2014 6:50 AM EST Send to a Friend
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Price: $11.12 -5.6%

Rating Summary:
    2 Buy, 6 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 14 | Down: 14 | New: 19
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Goldman Sachs upgraded Gigamon (NYSE: GIMO) from Neutral to Buy with a price target of $38 Following the 22% pullback since the company’s 3Q13 positive preannouncement on October 21, 2013.

"We believe the pullback was primarily driven by an operating margin guide- down for 4Q13 and lower FY14 operating margin outlook since Gigamon inadvertently hit its long-term operating margin target in 3Q13 (23.5% vs. target of 23-28%) due to slower than expected headcount additions)," analyst Kent Schofield said. "We believe Gigamon's market/technology leadership in the underpenetrated network visibility fabric market will produce better than expected CY14 results and see 36% upside to our $38 12-month price target."

The analyst sees Gigamon outperforming reset expectations due to three key drivers: (1) Distribution agreement with Arrow Electronics will provide Gigamon with meaningful incremental revenue; (2) Gigamon can meet their above consensus EPS estimates and still grow headcount 31% yoy in 3Q14; (3) Gigamon's higher than peers' revenue growth and long-term operating target to eliminate an unwarranted discount to peers.

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

Shares of Gigamon closed at $28.02 yesterday.




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