NEW YORK (TheStreet) -- Shares of Extreme Networks(EXTR) - Get Report closed higher by 8.98% to $4.37 on heavy trading volume on Thursday after DA Davidson raised its rating on the stock to "buy" from "neutral."
The firm also increased its price target to $5 from $4 on shares of the San Jose, CA-based provider of network infrastructure equipment.
The upgrade comes after Extreme Networks agreed to buy the wireless LAN division of Zebra Technologies (ZBRA) for about $55 million in cash yesterday. The acquisition boosts its growth prospects, according to the firm.
Extreme Networks "indicated that it would fund the purchase from that cash base as well as lines of credit. The Zebra assets should contribute revenue in the range of $29-$35 million per quarter, with gross margins for those products in the range of 45%-49% (below the company stand-alone gross margin of 55% last quarter)," DA Davidson wrote in a note earlier today.
The company anticipates that it can improve upon these margins, the firm added.
"When combined with its existing WLAN products, we believe approximately 25% of total EXTR revenue will be from the wireless networking market," DA Davidson said.
About 1.14 million of the company's shares changed hands today, well above its average 30-day volume of 391,505 shares.
Separately, TheStreet Ratings Team has a "Sell" rating with a score of D on Extreme Networks stock.
This is driven by several weaknesses, which 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 covered by the team.
The area that has been the company's primary weakness has been its declining revenues.
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: EXTR