NEW YORK (TheStreet) -- Aruba Networks (ARUN) shares are up 1.8% to $19.33 on Thursday after being upgraded to "buy" from "hold" by analysts at Stifel Nicolaus (SF - Get Report), with a price target of $24.
The upgraded outlook is based on the firm's belief that the company is winning away deals from rival Cisco (CSCO - Get Report).
"We continue to get positive feedback from VARs on Aruba versus Cisco. This aligns with our checks that show that Aruba is winning deals due to system level design (load-balancing software, ClientMatch feature, and access management/security)," said analysts.
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TheStreet Ratings team rates ARUBA NETWORKS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ARUBA NETWORKS INC (ARUN) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Communications Equipment industry and the overall market, ARUBA NETWORKS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- In its most recent trading session, ARUN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for ARUBA NETWORKS INC is currently very high, coming in at 71.93%. Regardless of ARUN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARUN's net profit margin of -3.36% significantly underperformed when compared to the industry average.
- Net operating cash flow has slightly increased to $27.36 million or 8.09% when compared to the same quarter last year. Despite an increase in cash flow, ARUBA NETWORKS INC's average is still marginally south of the industry average growth rate of 14.40%.
- ARUBA NETWORKS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ARUBA NETWORKS INC reported poor results of -$0.29 versus -$0.09 in the prior year. This year, the market expects an improvement in earnings ($0.76 versus -$0.29).
- You can view the full analysis from the report here: ARUN Ratings Report