Brocade Communications Systems, Inc. (NASDAQ: BRCD) is the beneficiary of a research call this morning from Broadpoint AmTech. Many research calls are not very aggressive and many are very reactive on the surface. That is the nature of many analyst estimates, and Wall Street analyst have to take criticism every time they are wrong. But some calls are very aggressive, and that is what we are seeing from this boutique.
Broadpoint AmTech is reiterating its “Buy” rating on Brocade, but is raising its target to $10.25 from a prior level of $9.00. That of course is not an all-time high, but that would be a high not seen in over two years and may even represent a 5-year high if the target is achieved. If you will recall, this was also touted a cheap overlooked tech stock by none other than Jim Cramer earlier this month. Shares were at $5.88 on Cramer’s call, and they closed at $7.13 yesterday.
This report calls Brocade an attractively priced “strategic asset” offering both SAN networking and Ethernet switching/routing products. The analyst call here noted that Brocade’s quarter was solid and the guidance for revenues above $1.9 to $2.0 billion. Its only issue was declining margins from the lower Foundry ethernet being under 50%, but the firm believes that will head north of 60%.
For fiscal-2010, Broadpoint AmTech now sees revenues of $2.5076 billion, 58.9% gross margin, sees earnings at $0.85 EPS; that compares to prior estimates of $0.75 EPS and $2.319 billion in revenues.
It appears as though this $10.25 target is now the highest target from the analyst community that follows Brocade. AmTech just initiated its coverage on the firm with a “Buy” rating last month, and last month we also saw both Piper Jaffray and Jefferies raise their ratings to “Buy” as well.
Brocade closed at $7.13 yesterday, and its 52-week trading range is $2.05 to $9.09.
JON C. OGG
MAY 22, 2009