While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Extreme Networks, Inc. (NASDAQ:EXTR) popped about 5% this morning after Wunderlich Securities initiated coverage on the networking gear company with a buy rating.
So what: Along with the bullish call, analyst Matthew Robison planted a price target of $9 on the stock, representing about 55% worth of upside to yesterday's close. So while momentum traders might be turned off by Extreme's share-price weakness in recent months, Robison's call could reflect a growing sense on Wall Street that its growth prospects are becoming too cheap to pass up.
Now what: According to Wunderlich, Extreme's risk/reward is rather attractive at this point. "Since purchasing Enterasys, Extreme has gained scale and uniqueness as an enterprise-focused network supplier with both switching and wireless," Robison said. "Growth opportunities are emerging with upgrade cycles: higher caliber wireless with analytics and network access control (NAC), as well as Ethernet fabrics for virtualization and lower latency." When you couple those positive trends with Extreme's forward price-to-sales of about 1, it's tough to disagree with Wunderlich's upgrade.
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