Gigamon (GIMO) is a new breed of computer network firms.
Instead of using the traditional Cisco (CSCO) model of building network hardware that supports proprietary software, GIMO offers software products that are overlays on network servers.
This is testament to how the network market has developed over the years and represents some very interesting opportunities for networking firms. It also spells doom for networking firms that can’t adapt to the new terrain.
The era of Big Data and Cloud computing has meant an explosion of server farms that are managed by service providers rather than having all this data run at an individual or business level. This new paradigm is now starting to gain traction for firms like GIMO.
Gigamon’s products are built to help run server farms (for Big Data and cloud-based firms), enterprise networks and service providers. It is also building out its integrated cybersecurity platform.
The latter would be a beneficial add-on to its networking applications because there wouldn’t have to be any integration with an outside security platform. Its GigaSECURE security delivery platform is set to launch in less than 3 weeks and could be a very big deal for the stock in Q1.
GIMO Carrying a Lot of Momentum
GIMO finished 2015 strong, with a big beat on earnings for Q4. It beat earnings estimates by 20% and grew adjusted net income a whopping 76% relative to the same quarter last year.
It also beat revenue estimates by almost 10% and posted a 30% revenue gain compared to last year.
What’s more, GIMO management is expecting a very strong Q1, far above analysts current estimates. The stock had a nice pop but enthusiasm was tempered with some analysts because a couple of insiders sold a significant amount of stock after the earnings release. That can be a signal that insiders think the stock has room … or reason to retreat. It may also just be tax selling now that we’ve reached a new calendar year.
There’s no doubt that GIMO is a volatile stock: Good news sends it significantly higher and whispers of doubt send it tumbling. A large part of the volatility is that GIMO is operating in relatively new market and is still establishing a dependable growth rate and revenue base.
That’s why some analysts aren’t comfortable taking GIMO’s expectations at face value.
But herein lies the opportunity. The fact is, the company has delivered on its promises and then some. Waiting until the company is established enough to maintain more price stability is not something that works for individual investors. By the time the funds and institutions decide to commit, most of the initial growth will be gone and the upside will be moderated.
Momentum is on GIMO’s side; now is the time to act.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
