McAfee Catches a Bid

Analysts give execution issues a pass as the company's enterprise business looks strong.
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McAfee's

(MFE)

stock soared on Friday, after the company posted

fourth-quarter earnings that were less than grim than feared, prompting several analysts to tout the company's potential.

Shares of the antivirus and security software firm leapt up by $2.92, or 13.35%, in recent trading to $24.80.

Deutsche Bank analyst Todd Raker upgraded the stock from hold to buy with a target price of $30, believing that the risk of

Microsoft's

(MSFT) - Get Report

entry into the market and "uncertain corporate execution" is more than reflected in the current stock price.

He wrote that the company has momentum with

Time Warner's

(TWX)

AOL and

Comcast

(CMCSA) - Get Report

, will be the default and recommended security provider for

Dell

(DELL) - Get Report

computers, and he believes the company is picking up market share within the enterprise market.

"McAfee's stock has sold off 21% since its January 23rd preannouncement, primarily due to investors' concerns of deal contract length artificially boosting bookings and potentially more widespread revenue recognition issues," Raker wrote. "The miss was primarily due to a lower realization rate from fewer perpetual plus renewals, an increase in bundled deals with Foundstone, and larger contracts with some small increase in contract lengths. Management may have made poor assumptions in its 4Q05 guidance, but these issues are not a result of a weakening in the underlying fundamentals of the enterprise business."

Credit Suisse analyst Philip Winslow said in a research note on Friday that the stock was "too cheap to ignore" and maintained his outperform rating.

"We do not believe that McAfee is a broken company, which the market is implying at current levels," Winslow wrote. "While McAfee slightly mis-executed and experienced an accounting impact, we reiterate our outperform rating, based on 1) expected disruption in two of its primary competitors, 2) traction in its ISP and OEM agreements, and 3) operating leverage in its model, and maintain our $37.50 target price."

Several weeks ago, the company had

warned that it would miss earnings targets, sending the stock tumbling.

JP Morgan analyst Sterling Auty was more cautious, maintaining his neutral rating of the stock.

"The risk we see in enterprise on slowing bookings, gross margin contraction, and the entrance of Microsoft in consumer market keeps us at a neutral," Auty wrote in a research note on Thursday.

Each of the investment companies cited has a financial relationship with McAfee.