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Why Riverbed Remains a Good Short to $15

As you can see, since reaching a high of $30.73 on January 26, the stock is now down 40% to its most recent close of $17.99. Remarkably, even with the current selloff, the stock still sports a P/E of over 50 and remains expensive when compared to a name such Citrix (CTXS) and remarkably Riverbed still carries a P/E twice that of EMC. So the questions, why are there still high expectations for a company that continues to disappoint the market?

Bottom line

Clearly, there are some major challenges with Riverbed and it does not appear that management has a firm handle on what the issues are or how to fix it. While it seems excuses continue to be made for why it is not living up to expectations, investors need to ask themselves how much time they are willing to wait until management figures it out. But in the process, other opportunities are coming and going -- many of which not only present much better value than Riverbed, but also have management teams that consistently demonstrate that they know what they are doing. I would not touch the stock at current levels and it might yet be a good short toward what I would gauge as a near-term bottom at a price of $15.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

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