weak hands is a good bet.
read some of the contradictory statements in this update:
UPDATE 1-Brocade shares fall 9 pct after Goldman caution
January 30, 2001 2:57:00 PM ET
(updates with analyst comments, stock price, byline)
By Timna Tanners
LOS ANGELES, Jan 30 (Reuters) - Shares of network storage equipment maker Brocade Communications Systems Inc. slid about 9
percent on Tuesday after a Goldman Sachs analyst said the company may find it difficult to keep its hot streak going.
Goldman analyst Laura Conigliaro said Brocade (BRCD) was not likely to deliver the same upside revenue surprises seen in the past, a
Goldman spokesman confirmed to Reuters. Given that, the stock's high valuation may be difficult to sustain, according to Conigliaro.
In mid-afternoon trade on Nasdaq, Brocade shares were off $9-11/16 at $95-1/4, though they had recovered somewhat from a session
low of $94. The stock was Nasdaq's No. 1 net loser on the day and was among the most active issues, with some 14 million shares
changing hands.
Analysts and traders said that apart from Conigliaro's comments, no other news about Brocade was in the market, and several block
trades were executed shortly after Goldman's morning conference call.
Conigliaro made positive comments on Brocade but said its stock price had reached high levels and noted a potentially slowing growth
rate, the Goldman spokesman said.
"The stock is trading at a high multiple, so it's an easy target," Banc of America Securities analyst Shaw Wu said.
On Monday, Brocade shares closed at 169 times projected earnings for 2001, according to research firm First Call/Thomson Financial.
That compares with the average S&P 500 price-to-earnings ratio over the past 12 months of 15.6.
"There are some fears that the company will miss quarterly earnings," Wu said, adding that he believes the company is on track to meet
analysts' consensus revenue and earnings estimates for the first quarter.
On average, Wall Street expects revenues of about $161 million and earnings per share of 12 cents, according to First Call.
"I think (Goldman) was becoming more conservative in its valuation parameters," A.G. Edwards & Sons analyst Shebly Seyrafi said of
Conigliaro's comments. "There's no new information from (Brocade)."
Seyrafi said the market for storage area networks remained healthy but said Brocade rival EMC Corp. (EMC) could be signaling greater
price competition.
Stock prices in the data storage industry have been under pressure in recent months on concerns over smaller corporate spending levels.
Brocade makes equipment designed to improve data storage in computer systems and fiber channel switches. The company is expected
to report earnings on Feb. 21 for its quarter ending on Wednesday.
© 2001 Reuters |
