Why Gigamon, Inc. Shares Soared
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 Gigamon, jumped more than 10% during Friday's intraday trading after Goldman Sachs upgraded the stock, and speculated that the network traffic visibility specialist could be a takeover target.
So what: Anticipating an earnings beat and raise when Gigamon announces next Tuesday, Goldman analyst Ken Schofield upgraded shares to buy from neutral, and assigned a $38 price target. Even after the pop, that still represents a healthy premium of nearly 25% from today's close.
Schofield explained his rationale by pointing to improving U.S. enterprise spending as demonstrated in the results of Gigamon's peers. To be sure, consider F5 Networks, shares of which spiked last week after it beat expectations and issued solid forward guidance. In addition, Schofield suggested Gigamon's strong margins and fast revenue growth could make it an attractive acquisition target.
Now what: Keep in mind that Gigamon stock plunged three months ago, when it beat expectations, but followed with weaker-than-expected forward guidance. And even now, the stock doesn't look particularly cheap trading around 28 times next year's estimated earnings.
Going into next week's report, analysts will be looking for adjusted earnings of $0.12 per share on sales of $41.9 million. Both figures are at the high end of Gigamon's own guidance, which calls for earnings of $0.10 to $0.12 per share on sales of $40.5 million to $42.5 million.
We'll see whether Goldman Sachs is correct, but if Gigamon can manage to beat its own expectations and raise forward guidance, investors could be happy they held on.
Consider the six amazing growth stocks in this free report
Gigamon isn't the only promising growth stock our market has to offer. So where else can you look?
Consider the investing expertise of Motley Fool co-founder David Gardner, who has proved skeptics wrong, time, and time, and time again, with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently, one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.
The article Why Gigamon, Inc. Shares Soared originally appeared on Fool.com.Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of F5 Networks. 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.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.