QLogic Rises As RBC Capital Turns Bullish, Ups Target

RBC Capital analyst Amit Daryanani this morning raised his rating on QLogic (QLGC) to Outperform from Sector Perform, lifting his price target to $17, from $15. The stock closed yesterday at $13.37.

Daryanani expects the storage networking company to benefit from a number of tailwinds in the months ahead:

• September quarter guidance looks conservative, calling for sequential revenue growth to be flat to up 3%. Over the past five September quarters, average growth has been 3%.


• Earnings comps getting easier.


• Intel refresh of server processors with Nehalem line should spur adoption of faster and more efficient input/output technologies, including 8 Gb Fibre Channel, 10 Gb Ethernet and 40 Gb InfinBand adapters and switches.


• Gross and operating margin expansion is possible as comps get easier and Nehalem server processor refresh leads to higher volume shipments and employee expense leverage.


• He also thinks the connectivity options - Fibre Channel, iSCSI, Ethernet, InfinBand - in the data center will consolidate into integrated offerings, and that “QLogic is likely the best public company to take advantage of the trend,” with expertise in all relevant areas.

QLGC today is up 70 cents, or 5.2%, to $14.07.