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.”
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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