EMC Gets Mixed Signals From Wall Street
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There was good news and bad news for EMC and its shareholders Monday when a pair of analysts offered up new and conflicting opinions on the storage software giant's stock.
Piper Jaffray analyst Troy Jensen downgraded EMC (NYSE: EMC) shares from an "overweight" rating to "neutral," largely because the stock has surged more than 36 percent since early July and isn't likely to see the kind of growth -- particularly in Europe -- that would justify such a lofty valuation.
"We remain upbeat with respect to the pent-up demand for storage, but believe this demand increase is already priced into EMC's shares," Jensen wrote in a research note Monday. He added that the stock probably won't exceed analysts' expectations in the near-term due to its 31 percent exposure to a weak European market and "already healthy expectations" for the fourth quarter.
Meanwhile, JMP Securities' Samuel Wilson initiated coverage of EMC shares with a "market outperform" rating -- the equivalent of a "buy" recommendation at other brokerage firms--and set a 12-month price target of $21 a share.
In a research note announcing the new coverage, Wilson said EMC stands to benefit from by virtue of its stake in virtualization software vendor VMware which he says is "driving a significant portion of current enterprise IT spending [decisions]." Also, Wilson likes EMC's recent acquisitions and says the company offers a "compelling sum-of-the-parts" valuation" that has been "systematically undervalued" by the market.
The mixed reviews pushed EMC shares down 20 cents, or 1 percent, to $16.80 in early-afternoon trading Monday. The stock has been on a tear recently, surging from a 52-week low of $8.25 a share in November to a peak of $17.30 earlier this month.
Last quarter, EMC topped analyst estimates when it posted a profit of $210 million, or $0.18 a share, on sales of $3.26 billion.
Analysts, many of whom are concerned by declining storage software sales worldwide, are projecting a profit of $0.20 a share in the third quarter on sales of $3.43 billion.
After Monday's conflicting research reports, 21 of the 34 analysts tracking EMC shares rate it either a "buy" or "strong buy" with 12 maintaining a "hold" rating and one analyst advising clients to sell the stock.