Why Emulex (ELX) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Emulex Corp.  (ELX) are falling -9.51% to $5.14 today after the company was downgraded to "underweight" from "equal weight" at Barclays  (BCS).

Analysts at the firm lowered its price target to $6 from $7, and noted they are not optimistic about the short term for network visibility.

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Separately, TheStreet Ratings team rates EMULEX CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate EMULEX CORP (ELX) a SELL. This is driven by multiple weaknesses, 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 unimpressive growth in net income and generally disappointing historical performance in the stock itself."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Communications Equipment industry average. The net income has decreased by 5.2% when compared to the same quarter one year ago, dropping from -$6.84 million to -$7.20 million.
  • Looking at the price performance of ELX's shares over the past 12 months, there is not much good news to report: the stock is down 26.60%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, EMULEX CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • ELX, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • EMULEX CORP's earnings per share declined by 12.5% 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, EMULEX CORP continued to lose money by earning -$0.06 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus -$0.06).
  • You can view the full analysis from the report here: ELX Ratings Report

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