From Standard & Poor's Equity Research
JMP Securities upgraded McDATA (MCDTA
) to outperform from market perform, explaining that the company is about to capitalize on two material product cycles over the next several quarters.
Analyst Samuel Wilson says the company is facing an industry wide transition from 2 Gbps fiber channel networks to 4 Gbps fiber channel networks. Second, he believes that the company has improving prospects for its high-end Intrepid 1000 series Director class product, where it is early to the game. He bumps his 2006 earnings per share (EPS) estimate by a penny to 25 cents and keeps his 35 cents 2007 estimate. Given the history of execution risks, he is reluctant to employ greater multiples at this time and sets a $4.50 stock price target.