Why Brocade Shares Boomed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of networking technology company Brocade Communications soared 15% today after its quarterly results and outlook topped Wall Street expectations.

So what: The stock has rebounded sharply in recent months on signs of recovering storage demand, and today's Q3 beat -- EPS of $0.19 on revenue of $536.6 million versus the consensus of $0.15 and $519 million -- coupled with upbeat guidance only reinforces that optimism. Additionally, operating margins during the quarter increased 210 basis points to 21.6% year over year, suggesting that management is also making solid progress in its cost-reduction goals.

Management now sees fourth-quarter EPS of $0.17-$0.19 on revenue of $545 million-$565 million, compared with Wall Street's view of $0.15 and $549 million. "We are seeing a rebound occurring in the broader storage market and believe that the recovery will strengthen for the remainder of this calendar year," CEO Lloyd Carney said in a statement. With the stock now up more than 50% from its 52-week lows and trading at a 25-plus P/E, however, much of that turnaround talk might already be baked into the price. 

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The article Why Brocade Shares Boomed originally appeared on Fool.com.

Fool contributor 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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