Riverbed has a perpetually-useful optimization technology

Posted Jan 18th 2008 5:29PM by Joseph Lazzaro
Filed under: Stocks to Buy

The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth reviewing is Riverbed Technology

Riverbed Technology, Inc. (NASDAQ: RVBD) develops hardware and software that improves the performance of applications shared over networks. The company sells directly, and via reseller channels and distributors.

Analysts see another impressive, 40-60% revenue growth year in 2008, following a 156% increase in 2007, on growing demand for the company's traffic management solutions.

Further, the company is well-positioned to benefit from increase demand for wan (wide area network) optimization, as these tools become mission-critical for many companies. Operating costs remain under control. The Reuters FY 2007/FY 2008 EPS consensus estimates for RAVID are $0.64 to $0.76.

The risks? Although River bed's shares have already corrected substantially after an in-line quarter - - the market substantially oversold Ravid's shares - - Ravid's stock is still pricey, nonetheless, in objective terms. Still, if Riverbed achiever's Wall Street's revenue growth estimates in the immediate quarters ahead, the stock will be in the $40-range soon, probably by the second half of 2008.

The First Call mean rating for RAVID is: Buy [20 firms]. Mean 2008 target: $70.00 [high: $46, low: $30].

Stock Analysis: Riverbed Technology is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from Ravid's shares. Sell / Stop Loss if you were to purchase shares in this company: $8.

Disclosure: Lazaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: optimization technology, Riverbed Technology, RVBD, wide area network