Brocade Communications Systems: There's Still Time To Get In

Brocade Communications Systems, Inc. (BRCD) is scheduled to report earnings on May 31. I generally focus on short term holdings, looking for a catalyst that will move a stock. However, when I find a good company that I believe in, (because of various factors) I may change my investment/trading strategy.

Brocade is one of those companies that I believe is a solid, long term holding. I think it's possible that BRCD doubles within the next two years. Brocade is still considered a "speculative stock" to some, while others have it on their radar and know where it's headed. I'm not saying it's going straight up, but I am saying that I believe BRCD's trading range will steadily increase over time. You wouldn't be wasting time if you took a look and came to your own conclusion.

Some of the growing pains from the acquisition of McData have probably been resolved by now (elimination of certain departments/comparable positions, etc.). If you're on the speculative side: If Brocade beats estimates, this may be the last time to get in before 10. The analyst at Goldman, who downgraded the stock to a HOLD, has an $11 price target. Yesterday's selling, because of that news, has created a great entry point.

BRCD 1-yr chart

Comments

[Mike Trilivas]

Brocade's a good company with solid fundamentals, and is a cash flow machine. The current number for the quarter is low. Stock buyback in place, over 40% of the revenue from overseas, a weak dollar and sales momentum should beat the number easily.

There's nothing speculative about Brocade even though Jim Cramer says there is but then again Jim has gotten Brocade wrong numerous times since last year. Clearly Brocade has been Jim's nemesis.

Brocade's coming out with 8Gb Fibre Channel products late summer/early fall and by all indications they will, again, lead the upgrade charge to this new technology.

The major concern with Brocade and the storage industry in general, is potential capex spending slowdown in the second half of the year so guidance here will be very important.

Bottom line...I believe Brocade's a long term Buy