FBN Securities Trims PT On Fusion-io (FIO) As Margins Worsen
Wednesday, January 25, 2022 10:49 AM

FBN Securities Inc. slashed its price target on Fusion-io Inc. (NYSE:FIO) to $26 from $29, saying margin concerns will keep a lid on the data-centric computing services provider in near term.

Shebly Seyrafi, an analyst at FBN retains his "Sector Perform" rating on the stock and said the company's margin forecast is worse than he had previously modeled.

The company's second-quarter gross margin shrank to 51.0 percent from 58.7 percent a year ago and 63.3 percent sequentially. FIO guided third quarter non-GAAP gross margin to be in the range of 50 percent.

Seyrafi said FIO's margins are being negatively impacted by "webscale" customers (think Facebook) buying lower margin products and by the recent move to purchasing next-generation (2x nm) NAND which has higher initial costs. 

"With EMC expected to launch Project Lightning (its server-side flash cache) shortly and increasing competition in PCI-e SSDs from OCZ and others, we still do not believe this is the time to buy FIO," Seyrafi wrote in a note.

A bright spot is the company's announced win of Salesforce.com (NASDAQ: CRM), a fast-growing SAAS vendor, he added.
Shares of the Salt Lake City, Utah-based company tumbled 18.7 percent to $24.65 in early trade on Wednesday. The stock has been trading in the 52-week range between $14.90 and $41.74.