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Small-Cap Watch: Infoblox (BLOX) Rebounds 7% on Pacific Crest 'Top Pick' Rating by TechStockProspector

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Pacific Crest sees multiple drivers for Infoblox that it thinks should sustain robust growth going forward. Infoblox shares are recovering from a sharp pullback (to a low of $28.95 last month) from the all-time high of $48.97 reached in October.

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									                             Robert DeFrancesco’s
                      Tech-Stock Prospector
January 10, 2014

Infoblox (BLOX) Rebounds 7% on Pacific Crest ‘Top Pick’ Rating

Pacific Crest today named Infoblox (BLOX, $38.19)—a provider of automated
network control and security solutions—one of its Top Picks for 2014, sending the
shares up more than 7% on active volume.

The analyst has increased confidence that the company is still in the early stages of
growth in automation, security and analytics.

Pacific Crest sees multiple drivers for Infoblox that it thinks should sustain robust
growth going forward:

1-Further penetration of the DDI segment, which could reach a TAM of $6.8 billion
over the longer term
2-New security products (DNS firewall) continue to see solid demand
3-International expansion opportunities
4-Private cloud & SDN adoption trends that require network automation
5-A promising future product roadmap in analytics

Infoblox shares are recovering from a sharp pullback (to a low of $28.95 last month)
from the all-time high of $48.97 reached in October.

In late November, Infoblox shares lost more than 28% in one session following the
release of fiscal Q1 (October) results. While EPS of 12 cents managed to top the
consensus estimate by three cents, revenue of $63.5 million (up a respectable 28%
year over year, but deceleration from 40% growth in the July quarter) only came in
$100,000 above the consensus.

In FQ1, product revenue rose 33% to $36 million (the lightest growth since the
January quarter) and even declined 2% sequentially after four straight quarters of
sequential growth.

The market had gotten used to Infoblox delivering big beat-and-raise quarters, so
expectations were very high going into the FQ1 results. For example, the company in
the previous quarter topped the consensus revenue estimate by 6.5% and reported
per-share earnings of 14 cents, five cents above the consensus.

On the FQ1 earnings call, Infoblox CEO Robert Thomas said there were no
significant disruptions in the overall business. He argued that the company simply
needed to digest the big revenue growth from past quarters. “Our pipeline is where
we expect it to be,” said Thomas. Indeed, some metrics looked pretty good: deferred
revenue of $103.28 million was up 32% year over year and 5% sequentially.

Infoblox is not having trouble attracting new accounts—it usually adds anywhere
from 170 to 200 new customers each quarter; the company’s installed base of
customers now totals more than 6,900. Management said there were no major
changes to the competitive environment and that the security unit continues to
ramp. Gross margin in FQ1 of 80% was up 100 basis points sequentially.

Interestingly, Infoblox did not reduce its top-line guidance for fiscal 2014 (July)—it
simply did not raise it as expected. The company still forecasts revenue of $270
million to $276 million (growth of 20% to 23%). While this guidance came in below
the consensus of $276.9 million (evidence that analysts were looking for a guide-
up), it was good enough to support Infoblox shares above $46 as recently as the
middle of November.

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Download the January 2014 issue of Tech-Stock Prospector to your Amazon
Kindle or Kindle for iPad/iPhone reading app here:
http://www.amzn.com/B004T6Z0ME

Here are some of the topics covered in the January 2014 issue:

*Top potential takeover targets in tech for 2014
*An update on the continued land grab in marketing automation
*How FireEye could spur more cybersecurity M&A
*Might Cisco Systems make a sizable acquisition to help jumpstart growth?
*A small-cap name that’s big in enterprise vulnerability management
*Proofpoint builds its targeted attack prevention business
*New growth drivers for ServiceNow in cloud-based IT management
*Digital-advertising play: Marin Software
*Cornerstone OnDemand stays competitive in talent management
*Qlik Technologies is ready to ride the data visualization wave
*Aruba Networks looks well positioned for the WiFi upgrade cycle
*Adobe Systems continues its move to the cloud
*Behind the big sales force reorganization at Symantec
*Demandware brings the cloud to digital commerce
*Why some savvy money managers like SolarWinds
*Nimble Storage is ready to take on the big legacy vendors
*Wall Street analysts keep boosting their Yahoo price targets
*Is Fortinet primed to execute again after naming a new CFO?
*Deal Report: RetailMeNot sees growth in digital coupons
Order the January 2014 issue of TSP here:
http://www.amzn.com/B004T6Z0ME


Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street.

TechStockProspector.com, launched in 2003, is an investment-research service
focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350.

For more information or to place an order, call 800-392-0998.

								
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