|Written by GSCR Staff|
|Thursday, 12 December 2013 09:38|
The Russell 2000 and correlated iShares Russell 2000 ETF (NYSE – IWM) are both on almost a two week slide that started the day after Thanksgiving. The index is down about 2% and the ETF is down about 3%. Is this a sign of a longer term slide and has the small cap sector run its course, or is this just a minor correction in a bull market? We think the latter, as the technical analysis and valuation both indicate that the bull market is here to stay for a while. What is more than likely occurring is some short term profit taking on some great gains for the year.
There are still some ladders out there. Extreme Networks, Inc. (NASDAQ – EXTR - $6.78) is a network infrastructure equipment service provider for business and enterprise data centers and service providers that has had some great deal action and introduction of new products recently. In mid November the Company announced a deal with Silicon Graphics International Corporation (NASDAQ – SGI) to provide network Hadoop solutions globally that work with Big Data, an industry that is expected to reach $24 billion by 2016, according to research firm IDC. On the product side Extreme Networks launched the Summit® X770, a highly scalable Top of Rack (TOR) switch that offers the industry's highest port density of 10GbE and advanced scalability, programmability and robust software features addressing Big Data and the cloud.
The market has not changed and neither has our three-point checklist. The technical analysis is bullish in the short and intermediate term, and very bullish long term for the Daily Moving Average metric. The company has become profitable related to EPS and this has set the forward 12-month P/E to a very low 9. Additionally, FY15 revenue is expected to jump 20% from FY14. Finally, the smart money has begun to accumulate EXTR as the stock has risen 68% on nearly 2 million shares traded per day over the last three months.
We think there is more room to climb the ladder over the next month or two. We think EXTR gets to $8 by the start of 2Q14.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com