Recent Decline In Gigamon Shares Leads D.A. Davidson To Upgrade

Shares of Gigamon Inc GIMO have declined by over 11 percent since October. Investors may have responded to management commentary on the partnership with AWS not generating revenue Gigamon until at least 2018, D.A. Davidson’s Mark Kelleher said in a report.

Analyst Kelleher upgraded the rating on the company from Neutral to Buy, while maintaining the price target at $60. He mentioned that the current share price provides meaningful upside to the price target.

Upside To Shares

The stock had been downgraded by D.A. Davidson in early October, since the price seemed to reflect “a significant beat to consensus expectations for the September quarter results, and we were not confident that any upside realized would be enough to maintain the stock’s momentum,” Kelleher explained.

However, Gigamon reported a healthy beat for the September quarter, and the stock maintained its valuation.

The more recent pressure on the share price came after the company’s investor conference in which management indicated that its budding partnership with Amazon.com, Inc. AMZN was unlikely to generate revenue until at least 2018.

For 2017, Gigamon planned to make a foray into the AWS market with free licenses for small implementations of its visibility software. “We do not have any revenue expectations for AWS built into our fiscal 2017 model, so any contribution would be upside to our projections,” the analyst noted.

At last check, Gigamon shares were up 2.28 percent on Friday, trading at $49.