How Low Can Riverbed Go?

Shares of Riverbed Technology (Nasdaq: RVBD  ) hit a 52-week low on Monday. Let's look at how it got here and whether dark clouds are ahead.

How it got here
The most recent earnings release was particularly brutal for Riverbed, sending shares to 52-week lows. Fast-forward two months and shares continue to trend lower, currently trading about what they did two years ago.

The recent pessimism is largely surrounding macroeconomic uncertainties and how that may weigh on IT spending. For example, just last week Pacific Crest analyst Brent Bracelin reduced his estimates on a slew of networking players, including Juniper (Nasdaq: JNPR  ) , Riverbed, F5 Networks (Nasdaq: FFIV  ) , and Aruba Networks (Nasdaq: ARUN  ) , among others.

Bracelin sees lengthening sales cycles in conjunction with economic headwinds that could hold the sector back as IT departments tighten their corporate purse strings. Overall, he's still bullish on the bunch and maintains outperform ratings but has slashed his price targets.

It's against this backdrop that Riverbed is tasked with evolving into a multiproduct company, recently announcing enhancements to its Stingray application delivery controller product family in a bid to get in on F5's bread and butter.

The company also boosted its share repurchase program to $150 million amid the depressed prices, a management vote of confidence that shares are cheap.

How it stacks up
Let's see how Riverbed stacks up with its networking peers.

RVBD Chart

RVBD data by YCharts

We'll add in some fundamental metrics for more information.

Company

P/E (TTM)

Sales Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

Riverbed Technology 44.3 11.5% 7.7% 8.4%
Cisco Systems (Nasdaq: CSCO  ) 12.5 6.6% 16.1% 14.9%
F5 Networks 29.1 22.4% 20.9% 22.8%
Juniper Networks 27.0 (6.3%) 7.1% 4.4%
Aruba Networks 28.2 24.7% 12.7% 17.4%

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter.

Riverbed continues to trade at relatively lofty multiples compared to its peers, yet it doesn't have the best growth, profitability, or return on equity.

What's next?
I've actually recently sold my own Riverbed shares and reinvested that capital into F5 as a more solid networking play that's larger, more profitable, growing more, and cheaper.

Riverbed still has a compelling product lineup, but there are justifiable fears that the niche WAN optimization market isn't as promising as once thought, and Riverbed has a lot to prove to regain its favor with investors.

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Fool contributor Evan Niu owns shares of F5 Networks, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Cisco Systems and Riverbed Technology. Motley Fool newsletter services have recommended buying shares of F5 Networks and Riverbed Technology. Motley Fool newsletter services have recommended creating a stock position in Riverbed Technology. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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