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Why Infoblox Inc. Is Ready to Rebound

By Brian D. Pacampara, CFA - Feb 20, 2014 at 9:51AM

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Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Infoblox (NYSE: BLOX) climbed 4% in pre-market trading after Goldman Sachs upgraded the network equipment company from neutral to buy.

So what: Along with the upgrade, analyst Kent Schofield planted a price target of $27 on the stock, representing about 40% worth of upside to yesterday's close. While momentum traders might be turned off by last week's earnings-related plummet, Schofield thinks Infoblox is now too cheap to pass up given his view of accelerating product growth.

Now what: According to Goldman, Infoblox's risk/reward trade-off is particularly attractive at this point. "[W]e expect the company will accelerate product revenue growth as (1) Infoblox returns to share gains in its underpenetrated core DDI market and (2) DNS firewall products contribute more meaningful revenues," noted Schofield. "We are raising FY15/16 revenue on returns from potential sales resource investment, but this also reduces FY14/15/16 EPS to $0.44/$0.53/$0.74 from $0.48/$0.57/$0.77." When you couple that positive outlook with Infoblox's beaten-down stock price, it's tough to disagree with Goldman's turnaround call. 

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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