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Gigamon (GIMO) Q3 Earnings: Will the Stock Disappoint?
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Gigamon Inc. is set to report third-quarter 2016 results on Oct 27. Last quarter, the company posted a negative earnings surprise of 88.89%. However, we note that Gigamon has delivered an average positive earnings surprise of 52.78% over the trailing four quarters.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
For third-quarter 2016, revenues are anticipated in the range of $78 million to $80 million, up 39% year over year at the midpoint. Gross margin is pegged at 82%, while operating expenses are expected to be in the range of $47.5 million to $48.5 million. Earnings are anticipated to be in the range of 29-31 cents per share.
We believe that Gigamon is well positioned to benefit from a rapidly growing network security solutions market, which is worth more than $18 billion. The ongoing transition to cloud and fast adoption of Internet of Things (IoT) technology presents significant growth potential for the company.
We believe that product launches will continue to drive growth. The GigaSMART and GigaVUE-HC2 platforms continue to witness increased adoption. Moreover, the company is adding clients, which should bolster its financial results.
However, in addition to intensifying competition from Cisco Systems (CSCO - Free Report) , the company faces pricing challenges. Gigamon may have to lower the price of its products and services to retain market share, which, in turn, will hurt its profitability.
Earnings Whispers
Our proven model does not conclusively show that Gigamon will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 13 cents. Hence, the difference is 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Gigamon carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:
SITO Mobile Ltd. has an earnings ESP of +100% and sports a Zacks Rank #1.
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
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Gigamon (GIMO) Q3 Earnings: Will the Stock Disappoint?
Gigamon Inc. is set to report third-quarter 2016 results on Oct 27. Last quarter, the company posted a negative earnings surprise of 88.89%. However, we note that Gigamon has delivered an average positive earnings surprise of 52.78% over the trailing four quarters.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
For third-quarter 2016, revenues are anticipated in the range of $78 million to $80 million, up 39% year over year at the midpoint. Gross margin is pegged at 82%, while operating expenses are expected to be in the range of $47.5 million to $48.5 million. Earnings are anticipated to be in the range of 29-31 cents per share.
We believe that Gigamon is well positioned to benefit from a rapidly growing network security solutions market, which is worth more than $18 billion. The ongoing transition to cloud and fast adoption of Internet of Things (IoT) technology presents significant growth potential for the company.
We believe that product launches will continue to drive growth. The GigaSMART and GigaVUE-HC2 platforms continue to witness increased adoption. Moreover, the company is adding clients, which should bolster its financial results.
GIGAMON INC Price and EPS Surprise
GIGAMON INC Price and EPS Surprise | GIGAMON INC Quote
However, in addition to intensifying competition from Cisco Systems (CSCO - Free Report) , the company faces pricing challenges. Gigamon may have to lower the price of its products and services to retain market share, which, in turn, will hurt its profitability.
Earnings Whispers
Our proven model does not conclusively show that Gigamon will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 13 cents. Hence, the difference is 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Gigamon carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:
SITO Mobile Ltd. has an earnings ESP of +100% and sports a Zacks Rank #1.
Veeco Instruments Inc. (VECO - Free Report) has an earnings ESP of +17.86% and also flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>