How Will QLogic (QLGC) Stock Be Affected By This Analyst Rating?

NEW YORK (TheStreet) -- QLogic (QLGC) shares are down -2.08% to $8.93 today after the company's rating was cut to "equal weight" from "overweight," and had its price target lowered from $13 to $10 at Barclays  (BCS).

"In March QLogic guided to 30% declines in legacy business and the news from QLogic from the June quarter was not encouraging with regard to the near term," said analysts, "We do not see much room for out performance for QLogic now that its share buyback appears to be on hold..."

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TheStreet Ratings team rates QLOGIC CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate QLOGIC CORP (QLGC) 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 increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 296.7% when compared to the same quarter one year prior, rising from -$3.05 million to $6.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • QLOGIC CORP 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, QLOGIC CORP swung to a loss, reporting -$0.20 versus $0.80 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus -$0.20).
  • Net operating cash flow has significantly decreased to -$16.62 million or 200.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 Computers & Peripherals industry and the overall market, QLOGIC CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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