Monday, June 29, 2009

Even Handed Story on Riverbed Technology (RVBD) on CBSMarketwatch

There is a nice writeup on Riverbed Technology (RVBD) this morning on CBSMarketwatch which quite fairly sums up my views as well; pro and con. This is one of the current "untouchables" and until it breaks the trend, the computers will continue to purchase it... it appears. I still have my stop loss at just under $22 because many times when these uptrends break, it can get ugly fast.
  • Unlike many other companies that sell high-tech products to corporations, Riverbed Technology Inc. has managed to defy much of the downturn with steady sales growth over the last year.
  • Investors have rewarded the company's performance by snapping up its stock, which has more than doubled so far this year and neared the $25 level last week to hit its highest level in nearly 18 months.
  • That run-up has left Wall Street divided on the stock. Riverbed now trades at a notable premium to other peers in corporate networking gear market.
  • "Expectations are reaching a high point, although fundamentals remain solid," Ryan Hutchinson, technology gear analyst for Lazard Capital Markets, wrote in a note to clients on June 25 -- the day the stock hit a high of $24.80. Hutchinson said he believes Riverbed deserves "a significant premium" to its peer group, but that "expectations for a beat and raise quarter are likely priced in." He nevertheless upped his price target on the stock to $26 from $17. Riverbed is slated to make its next quarterly earnings report on July 23.
  • At their current level, Riverbed shares command a large premium over peers in the networking space. Riverbed trades about 35 times estimated earnings for the next four quarters compared to an average valuation in the low teens for many of its peers.
  • Founded in 2002, San Francisco-based Riverbed makes hardware and software designed to allow businesses to make more efficient use of their wide-area networks, or WANs. The company's main products are its Steelhead appliances and RiOS software. Riverbed has benefited from corporations' efforts to save money by maximizing use of their existing networks before buying expensive gear to expand them. Sales have been on a steady pace of growth since the company went public in late 2006. In its most recent period, revenue grew 21% from the same period last year to hit $88.2 million. Earnings jumped to $974,000 - up 53% from the same period last year.
  • "Riverbed is a leading pure-play vendor in the fertile wide-area data services (WDS) space, offering organizations a comprehensive solution that broadly addresses the interrelated root causes of poor performance of wide-area distributed computing," Daniel Ives of FBR Capital Markets wrote in a June 23 report, in which he initiated coverage of the company.
  • But despite that he considers Riverbed "the clear technological leader" in its segment, Ives started the company with a market perform, or neutral, rating. He thinks growing competition and the tough economy could limit the company's upside. Ives set a $22 price target on the stock -- slightly below the $23 median price target among other analysts. Wall Street is split on the stock, with ten analysts rating the shares as a buy while 14 maintain neutral views.
Long Riverbed Technology in fund and personal account

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