Summit Research Upgrades Brocade (BRCD) to Hold

Summit Research upgraded Brocade (NASDAQ: BRCD) from Sell to Hold with a price target of $10.00 (from $8.50).

Analyst Srini Nandury commented, "We are upgrading Brocade to HOLD rating and raising our PT to $10 on our better outlook for Brocade's Fibre Channel (FC) business. After attending a well-attended analyst meeting last week, we believe Brocade's FC business is in better shape than what we had previously believed. We believe the FC business is NOT declining (previously assumed low single digit decline) but is actually growing at a rate that is in the low-single digits (1-3%). This bodes well for the stock given that the margins will likely be stable (in fact the company raised gross margin estimate by 1 point) providing steady stream of cash flows to fund investments and returning cash to shareholders (via buybacks and dividend). In addition, we believe the company will likely grow its Ethernet business (both data center and service provider) faster than the market helped by secular shift in the data center to fabrics, NFV/SDN. In addition, with the strength of its products (MLXe and VDX) and its software offerings (NFV and SDN), we are optimistic the growth could have long legs. Given management's stellar execution thus far, we are optimistic Brocade will deliver what it is promising."

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

Shares of Brocade closed at $10.80 yesterday.

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