Mark, as jnic has no trading history, I based my price target on market cap relative to competition (always relevant anyway).
Most of jnic's competition (emlx, qlogic, IBM, HP and Sun) are not pure plays, so I didn't 'mess' with them. <g>
That leaves brcd and zoox, which really aren't direct competition, as switches (not asics and buses) are important components of their product lines. Nevertheless, I figured that Wall Street would still compare market caps within the sector.
zoox seems to be a special situation with its own problems. As jnic appears to be a very healthy company with much going for it, I concluded that it's market cap would reflect brcd's more so than zoox'.
At the time I last looked in early October, sector leader brcd had a market cap of 4B. It seemed reasonable to me that jnic would command a market cap 1/2 that, or 2B. That's about $92/share. Hence my $90-100 near-term price target.
However, brcd's market cap has since grown to 7.2B. Using the same ratio, that would place jnic's share price at $175/share. However, brcd has been public for almost 6 months, so one could expect jnic to take that long to grow into that valuation.
At any rate, a 2B market cap for a quality second-tier company in a hot comm infrastructure sector seems reasonable to me, given the market caps of companies like jnpr, fdry, aton, etc.
In fact, given yesterday's price action in the stock, my $90-100 price target looks downright conservative. :))) |
