With earnings reports on the horizon and a tremendous amount of uncertainties surrounding corporate officials, you must think that I am crazy to think that Brocade Communication Systems Inc. is a strong buy. However, if you look closely at both the fundamental and technical aspects, you will see there is a great opportunity for profit in this company. As an equity competent in dealings with data storage and networking, you might also want to argue that as a technology stock there is not much potential for high growth in terms of price advance. While such a trend may hold some relevance, in the case for Brocade (BRCD), the company is already at a low price relative to what it should be at. Near the 52 week low relative to its high, BRCD stumbled a few days ago after purchasing McData Corporations for near $4.61 a share. As such a venture usually contributes to higher costs by such an action, the stock plummeted nearly 20% following the news. Already having some volatility because of stock option controversy, the stock has been hit quite a bit. However, debate aside it seems that BRCD has hit its support level. Speaking on technical terms, with such news it was clear that BRCD was going to break its previous support level which stayed around 5.50 for nearly seven months. However, with the new acquisition, the stock fell to near 5.00 most of the day, and even with such a purchase did not seem to fall any further. As a smart investor, you would have noticed such a trend and take advantage of such signals, but if you did miss it there is still a chance to get into the action. With both a one year estimate and 52 week high around 7.10, there is a high possibility that this company will provide high capital gains by the end of the year. While the fundamentals for the recent quarter are near and should not be all that favorable, the recent acquisition with McData should help future guidance for BRCD, utilizing the process of synergy to achieve both cost cutting and profit making advances. While such an amalgamation may take some time, I can potentially see BRCD going as high as 15.00 by December of next year. Such an acquisition will only lead to new growth, and with a resistance level firmly in support, I would recommend BRCD as a mid to long term buy at a price of 5.00-5.30. |
