QLogic's Stock Doesn't Offer A Compelling Risk Reward
David Hernandez • Today, 7:15 AM
- QLogic has struggled over the last few years. The company's struggles have been caused by the decline in the SAN market. Yet, the SAN market has begun to stabilize.
- The stabilization of the SAN market has resulted in QLogic growing SAN related revenue. Additionally, they have been able to outpace the industry's growth through significant market share gains.
- Yet, the company's current market position and stronger competition makes continuing to gain significant market share much more difficult. QLogic needs a long-term growth driver which Ethernet can be.
- Ethernet revenue has and should continue to grow rapidly because of the company's strong market position. They have a very high design win rate which will continue to drive revenue.
- QLogic's revenue should continue to grow due to the Ethernet and fibre channel segment's growth. Yet, the stock's current valuation drastically reduces the risk reward.