For Barracuda Networks, JMP Securities Changes Its Tune

Following the 15 percent pullback in Barracuda Networks Inc CUDA shares as compared to the 3 percent appreciation in the Nasdaq, JMP Securities’ Erik Suppiger mentioned that although the stock continued to trade at a premium to peers, there was limited downside risk.

Suppiger upgraded the rating on the company from Market Underperform to Market Perform.

Stabilized Momentum

The analyst stated checks indicate Barracuda Networks’ business momentum had stabilized, and the company was successfully transitioning to cloud computing.

“Our discussions suggest Barracuda finished out the November quarter nicely, despite some modest pushing towards the end of the quarter,” Suppiger went on to say.

Upside Expected

The analyst expects the company to report modest upside for the quarter, while providing its guidance mostly in line with the consensus when Barracuda Networks reports its earnings on January 9.

“We believe morale has improved and that the company’s increased focus on high-growth areas is beginning to bear fruit,” the analyst noted.

Premium Justified

Suppiger explained that there were three key reasons for the upgrade in the rating. Firstly, including checks that indicate that sales turnover had stabilized in most regions.

Secondly, the transition to the cloud has been progressing more smoothly than expected, and thirdly, Barracuda Networks’ managed service provider business could prove to be a longer-term catalyst for the stock.

The analyst believes that the stock’s premium to peers is justified, given Barracuda Networks’ emerging cloud solutions, which represented an “attractive catalyst” as they become more meaningful in late 2017 and beyond.

At last check, the stock was up 3.22 percent at $22.11.