Brocade (BRCD) Stock Slips, Baird Downgrades to ‘Underperform’

Brocade (BRCD) stock is retreating in pre-market trading Thursday as Baird reduced its rating on shares to ‘underperform.’
By Kaya Yurieff ,

NEW YORK (TheStreet) -- Shares of Brocade Communications Systems (BRCD) are down 2.15% to $9.58 in pre-market trading Thursday as Robert W.Baird cut its rating on the stock to "underperform" from "neutral."

The firm also lowered its price target to $8 from $10.

Baird cited All-Flash Array (AFA) growth in enterprise as a deflationary force for the company's core Fibre Channel market, according to Barron's.

While the firm expects Brocade to keep a high attach rate to AFA, Baird sees the port count opportunity declining "meaningfully" in the next few years.

"All-Flash Array commentary has accelerated sharply in our conversations with the partner community. It's become common for a storage reseller to tell us that AFA will become the de facto standard for primary storage applications with HDD-based arrays relegated to back-up and archive solutions," the firm wrote in an analyst note.

Although Baird noted there are some cost levers that Brocade could use to support earnings, the firm believes that a secular shift of this magnitude will weigh on shares, Barron's added.

Separately, TheStreet Ratings Team has a "Buy" rating with a score of B- on the stock.

The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and notable return on equity. 

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

You can view the full analysis from the report here: BRCD

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