In a note to investors, BMO Capital Markets raised its price target for Aruba Networks to $26 from $22, reiterating its "market perform" rating.
The analyst firm also raised its fiscal 2015 EPS estimates for the network and communications equipment maker to $1.17 a share from $1.12. BMO analysts expect Aruba Networks to report earnings of $1.44 for fiscal year 2016, up from its previous estimate of $1.35 a share.
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The increases come after a positive fiscal second quarter for Aruba Networks, in which it reported earnings of 30 cents a share, beating analysts' estimates of 27 cents a share. Revenue grew 20.7% year over year to $212.9 million for the quarter, above analysts' estimates of $210.22 million.
Aruba Networks' fiscal second quarter results were largely driven by strong federal sales, which grew 100% from the year-ago quarter. BMO analysts said the company's margins were "very strong" in the quarter, and that "the improvement in op margins reflects the better sales and strong expense management."
BMO analysts said, "Any concerns regarding the impact of comp changes on the salesforce were overblown as there was a lot to like in the quarter, as revenues, margins, and EPS were all better than expected, even with the K-12 headwind. While E-Rate has suppressed near-term spending in the education vertical, it should turn into an industry tailwind later in the year. Along with the ongoing transition to 802.11ac, we see positive growth dynamics for enterprise WLAN market."
TheStreet Ratings team rates ARUBA NETWORKS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ARUBA NETWORKS INC (ARUN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
You can view the full analysis from the report here: ARUN Ratings Report