Riverbed Technology Unmoved By Morgan Stanley Initiation

Luke Jacobi

Morgan Stanley sees upside in Riverbed Technology (NASDAQ: RVBD), but initiated the stock at Equal-weight.

Analyst James Faucette describes one of his key concerns, “With its core WAN optimization market growth down to ~6%, expanding the addressable market is critical, and we believe Riverbed's unified vision has a chance to gain traction, if it can overcome enterprise IT buying decisions that are sometimes disjointed when it comes to performance management, storage, and network optimization.”

In addition, uncertainty regarding the Federal budget has made revenue more volatile. About 30 percent of revenue used to be the result of government work, however, the government was responsible for just eight percent of sales in 2013.

Faucette estimates that Wall Street’s EPS expectations imply an eight percent terminal growth rate, which Faucette thinks is reasonable.

Shares of Riverbed Technology closed at $20.54 Tuesday.

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