Supported by a fine fourth-quarter report, shares of Aruba Networks (Nasdaq: ARUN) jumped as much as 19% on Friday. The sudden boost erased nearly four months of bad market blood in one fell swoop.
Analysts were expecting the maker of enterprise-grade Wi-Fi gear to report adjusted earnings of $0.17 per share on $137 million in sales. The company reported non-GAAP earnings of $0.18 per share on $139 million in revenue, edging out estimates on both counts.
CEO Dominic Orr said that his target markets look strong: "Our differentiated mobile-centric approach to the access network and value proposition continues to resonate with customers," he said. "The global proliferation of mobile devices and the [Bring Your Own Device] trend fundamentally change how users securely connect to their enterprise resources." In other words, smartphones and tablets are changing the way businesses manage their networking needs -- and Aruba is happy to ride that wave.
But a 6% earnings surprise with 1.5% of unexpected revenue strength is hardly enough to fuel an overnight 19% price gain. Indeed, the big market move didn't start until a flood of admiring analyst comments started pouring in.
Analyst firm Needham, for one, noted that Aruba is handling Cisco Systems' (Nasdaq: CSCO) recent moves in the Wi-Fi space with aplomb. Growth rates have fallen from Aruba's customary 30% levels to the 20% range, but at least they seem to have stabilized by now. Needham reiterated its buy rating on the stock and raised its price target by 15%, to $23 per share.
Elsewhere, Jefferies bumped Aruba's target price from $16 to $18 per share with a stable hold rating. "The company is executing well and the business environment appears to have recovered from a rocky [third quarter]," the firm said.
These comments also pulled up some smaller players in the corporate Wi-Fi space by the bootstraps. Chip designer DragonWave jumped nearly 5% and radio-signal technologist Ubiquiti Networks (Nasdaq: UBNT) gained more than 6%. The rationale here is that strong business for Aruba would also be positive news for smaller partners and competitors.
Don't be too quick to jump on that bandwagon, though: This rising tide doesn't lift all boats equally. Ubiquiti got a 40% haircut when it reported weak results earlier this month. DragonWave's second-quarter report is due in early October, and that company will stand or fall on its own merits.
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