Friday, September 11, 2009

Disappointing Moves in Riverbed Systems

Riverbed (RVBD) has been stuck in a range between $19 and $20 ever since they reported a supposedly disappointing earnings report for Q2. The main reason the report was disappointing is that the hype in the analyst community had gotten pretty fevor pitched that RVBD would post a much better then expected Q. Instead they printed a below expectations revenue number and the stock quickly swooned from $26. Since then the market has been busy chasing the trash in the market and RVBD has been discarded as trash. With a healthy balance sheet and strong earnings potential they will be rediscovered.

RVBD is one of the few companies that has shown growth during this horrible economy so its amazing that the market has so quickly forgotten them. Not holding $20 today was a pretty bearish signal and the chart doesn't look very impressive. We think its hardly because RVBD has any issues, but rather the market chasing all the low quality stocks beaten up so bad last year. Expect that to turn back in favor of RVBD soon. Once the technicals change you'll want to jump back on this stock.

The only thing negative about the news in RVBD is that we found out that they weren't immune to the credit crunch. Customers might be deploying their equipment more then last year, but the rate of growth has slowed. So if anything it should be picking back up with the economy. Companies will still have the same desires to cut costs, but now they'll have the financial flexibility to purchase RVBD equipment.

Buy RVBD once the technicals turn.


Disclosure: Long RVBD in client/personal accounts.

No comments: