- Blue Coat Systems (BCSI) shares are down sharply this morning after Roth Capital analyst Joshua Jabs downgraded the stock to Hold from Buy. He actually raised his price target on the stock to $42 from $40.
- Jabs says he expects results for the company’s fiscal second quarter ended October to be “solid.” And he expects the company to continue to take share in the WAN Applications Delivery market.
- But he also says that after a big run - the stock is up 240% year to date - BCSI is now “appropriately priced,” particularly given “multiple contraction” in the sector. He points to recent selloffs by Riverbed Technology (RVBD) and F5 Networks (FFIV). “We believe Blue Coat’s comparable revenue is now valued at a premium to comps and its expected growth rate,” he writes.
RVBD 44x 2008 estimates
BCSI 31x 2008 estimates
The stock seems to be holding up well around $40 and I am not sure what more bad karma could be thrown it's way at this point. The open question is what sort of multiple is deserved in this group and for each stock? Riverbed also executed, it was just valued at a major premium.
I added more Blue Coat Systems on this dip as it hovers at $40, its 50 day moving average; Blue Coat doesn't report until later in November - I would not be surprised to see a pre earnings run if the market doesn't tank. The risk with buying here instead of a stock at a 52 week high is it could break this support level and go materially lower. This is why a momentum investor would never buy a stock in this technical position... but I tend to like them. (with the understanding if it breaks this support you need to lighten up, since that opens the door for much larger drops)
Long Blue Coat Systems, Riverbed Technology in fund and in personal account
