Morgan Stanley Comments On Riverbed's Guidance Cut


Riverbed Technology (NASDAQ: RVBD) lowered second quarter guidance Monday, sending the stock down 8.6 percent. Morgan Stanley, who has an Equal-weight rating on Riverbed, weighed in on the cut guidance.

Analyst James Faucette wrote, “we think the 10% 2H14 growth implied by our 8% 2014 revenue growth estimate this is slightly optimistic. As a result we are revising our revenue estimates down slightly, expecting+6% YoY growth for 2014, implying 8% 2H14 YoY growth. Given federal fiscal year end in 3Q and strong traditionally strong 4Q results, we think this slight acceleration into year end is achievable.”

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Faucette further commented that gross margins may come in better than expected as Riverbed expects to meet EPS estimates.

Morgan Stanley has a $20 price target on Riverbed, which is based on 15 times 2015 earnings. In order for the company to reach Morgan Stanley’s $20 price target, Faucette states that the firm will need to make substantial operating expense cuts.

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