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Riverbed Technology, Inc. Message Board

  • ezk00 ezk00 Dec 4, 2012 1:01 PM Flag

    RVBD: Mizuho Ups Target to $32 on Opnet Model

    Dec 4, 2012
    12:40 PM RVBD: Mizuho Ups Target to $32 on Opnet Model
    By Tiernan Ray
    Mizuho Securities’s Gabriel Lowy today reiterates a Buy rating on shares of networker Riverbed Technologies (RVBD), and raises his price target to $32 from $27, after raising his revenue and profit estimates to account for the inclusion of Opnet Technologies (OPNT), which Riverbed announced October 30th it would acquire for $1 billion in cash.

    That deal had caused Riverbed shares to drop 18% the day after it was announced, but Lowy writes that while investors may be concerned about the cost of the deal and the execution issues, the company’s track record should earn it some credit, and the margins can end up being perhaps better than feared:

    Concerns about integration are valid, as large deals rarely go smoothly. That said, RVBD has a good track record in software engineering and familiarity with APM. Marrying Cascade with OPNT APM elevates the company into a market share consolidator in a ~$4B TAM with products growing faster than its core […] Expansion of OPNT’s direct sales and channel presence, especially overseas, leaves little room for FY13 improvement on OPNT’s 20% non-GAAP operating margin. However, 22% projected product growth in FY14 ($187.8M; 22% of total), owing to aggressive product and go-to-market investments, should start to lift APM/NPM margin into the low 20% range. We model RVBD’s FY14 blended margin at 26.0%.

    He also thinks the purchase price, at 4.5 times projected revenue for Opnet, and 23 times projected GAAP profit, was “full,” but a good use of cash.

    Lowy raised his 2013 estimate to $1.2 billion and $1.27 per share from a prior $992.6 millii and $1.21 per share.

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