FBN Securities Inc. analyst Shebly Seyrafi raised his price target on Brocade Communications Systems Inc. (NASDAQ:BRCD) to $6.50 from $5.50, following the company's quarterly results.
Seyrafi noted that BRCD reported a solid revenue and EPS beat for FQ1, and is now spending more for FQ2 so it is guiding revenue and EPS roughly in line with consensus.
"Still, BRCD is not growing the top line much (3% in FQ1) as it plays in a rather mature market. Therefore, investors should not pay much more than 10x on next year's earnings," Seyrafi wrote in a note.
"Bloomberg reports that last week Blackstone Group LP (world's largest private equity firm) ended talks to acquire BRCD as the price was too high. Bloomberg wrote in the past that smaller private-equity firm Thoma Bravo passed on a deal to acquire BRCD. A smaller M&A premium is therefore indicated for BRCD," Seyrafi noted.
BRCD shares, which have been trading between $3.18 and $7.30 over the past year, rose 4.8 percent to $5.76 on Wednesday.