Friday, August 24, 2007

Brocade (NASDAQ:BRCD): Bullish on the stock

What's up with Brocade (NASDAQ:BRCD) this morning? The results were in-line or slightly better than pre-announced, with revenue guidance for Q4 tad weaker than consensus. The stock got hit a lil in after hours action but I suspect it stands to appreciate today as the margin guidance was surprisingly good. BRCD management expects to hit tgt margins in Q4 with GM around 55-56% and OM around 19-20%. Yeah, the mid-point of Q4 revenue guidance was below consensus but it should not come as a surprise given the performance at NTAP and QLGC.

Heck, the thing is trading 10-11x EPS here. Also note that according to management, they are keeping Q4 guidance conservative and will step it up if overall macro picture shows signs of improvement.

We have JMP Securities out with an upgrade this AM taking their rating to Outperform from Mkt Perform. Also, Lehman thinks BRCD likely to appreciate as investors show relief that mgmt can deliver higher EPS despite modestly disappointing rev.

I think that if you can pick up this beaten down stock at around close early on, you'll make money on it today.

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