Ruckus Wireless Inc (RKUS): Is This Sell-off Justified?

Valuations

For FY2013/2014, the Street estimates the EPS to be $2.40/$2.65 from prior estimates of $2.74/$3.06 on lower Commercial/SP revenues.

On the basis of a forward multiple of 15x and 2013 EPS of $2.40, Goldman Sachs has set a target price of $36, which is 9% upside from current levels.

Key Risks

Risks include market growth, market share shifts, and macro uncertainty.

Ruckus Wireless Inc (NYSE:RKUS)

This has been one of the other wireless equipment players that has suffered as result of negative investor sentiment. Despite an earnings beat and revenue guidance in-line for FY2013, the stock has been falling mercilessly as investors are fearing a weak market ahead of them. The stock is down 23% since the earnings release on Feb. 12.  On its earnings call, Ruckus did note that it expects its 2013 profits to be affected some by sales/R&D investments, but struck an upbeat tone about demand. Therefore, I believe the stock has been unlucky given such a massive fall. Some believe that the stock is getting punished for having expensive valuations, as recently the stock was downgraded by Needham.

Foolish Bottom Line

There is no doubt that this industry faces some headwinds in the form of weak commercial demand. However, the recent sell-off has brought prices to ideal levels.

The article Is This Sell-off Justified? originally appeared on Fool.com and is written by Masam Abbas.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.