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Brocade Communications Soars on Earnings Beat, Analyst Attention

BRCD erases nearly all of its year-to-date deficit

by 11/22/2011 1:30:10 PM
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Brocade Communications Systems, Inc. (BRCD - 5.00) is on the receiving end of some bullish praise this afternoon, as the California-based computer concern reported adjusted fourth-quarter earnings of 16 cents per share, besting analyst expectations for a per-share profit of 10 cents. In addition, BRCD forecast fiscal first-quarter earnings and revenue above Wall Street projections.

Specifically, RBC raised its price target to $5.50 from $4.50; Piper Jaffray's target jumped to $4.50 from $4; Needham, BMO, and FBN upped the price targets on BRCD to $5.50 from $5.00; Wunderlich Securities changed its outlook to $7 from $6; UBS' target rose to $5.00 from $4.35; and not wanting to miss out on the celebration, Goldman Sachs' price estimate went to $4 from $3.50.

 Buy/Sell/Hold Ratings Chart of BRCD for November 2011In the face of earnings, analyst sentiment surrounding BRCD had been somewhat tepid. Zacks reports that 17 out of 25 analysts maintain a "hold" or worse opinion toward the stock. In addition, Thomson Reuters pegs the average 12-month price target at $5.24, a 17% premium to yesterday's closing price of $4.48.

However, Wall Street is taking very kindly to the earnings beat, as shares of the stock are up over 12% in today's session, nearly erasing BRCD's year-to-date deficit of 15.3%. In fact, much of the year's decline came as the company lowered its third-quarter guidance in August, when the equity dropped significantly, and tagged an annual low of $3.18 in the process. Since then, BRCD has managed to muscle its way higher by a significant 44%.

Ahead of the announcement, options players have been bearish toward the stock. BRCD's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 ranks higher than 88% of similar annual readings -- indicating that pessimistic positions have been picked up at increased levels over the past two weeks.

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