May 30 Shares of Infoblox Inc were set
to open down 33 percent on Friday, a day after the network
equipment maker warned of a lower-than-expected profit for the
current quarter, hurt by contract delays and a slowdown in
At least four brokerages lowered their rating to "hold" or
equivalent, also highlighting concerns that a turnaround in the
company's fortunes, which could last more than a year, would not
be led by its chief executive of nearly 10 years, Robert Thomas.
At least seven brokerages lowered their price target on
Infoblox's stock, with Goldman Sachs more than halving its
target to $15. The stock was trading down 34 percent at $13.54
in premarket trading on Friday.
Analysts said they expect sales of the company's network
automation products to remain weak, as IT customers were
prioritizing network security over automation.
"It has become clear there is not a quick and easy fix for
the sharp slowdown in product orders that began last October,"
Pacific Crest analyst Brent Bracelin wrote in a note.
The brokerage cut its rating on the stock to "sector
perform" from "outperform".
Infoblox said it expected to break even or earn up to 2
cents per share on an adjusted basis in the quarter ending July.
Analysts on average were expecting 6 cents per share, according
to Thomson Reuters I/B/E/S.
The weakness could last longer, with Wedbush Securities
analyst Sanjit Singh estimating a turnaround could take anything
between three to six quarters as Infoblox could take up to nine
months to book revenue from a sale.
Singh lowered his price target to $18 from $25 and has a
"neutral" rating on the stock.
Analysts also raised concerns as to how the company would
navigate the competitive network automation market after CEO
Thomas left. Infoblox did not say when Thomas would step down.
The resignation could be another indicator that the market,
long-term growth and operating margins of the company were
likely less attractive than thought, Citigroup analysts wrote in
a note. The brokerage lowered its price target to $15 from $25.
Shares of Infoblox have fallen about 38 percent this year to
Thursday's close of $20.52. At that price the stock is more than
three times it worth, according to StarMine's intrinsic
valuation model, which takes analysts' five-year estimates and
models the growth trajectory over a longer period of time.
The stock is also expensive. At Thursday's close, Infoblox
traded at 59.9 times forward earnings, higher than an sector
median of 18.4 times, according to Thomson Reuters StarMine.
(Reporting By Lehar Maan in Bangalore; Editing by Savio