UPDATE: Piper Jaffray Upgrades Emulex as OPEX Cuts, Capital Allocation Are a Step in the Right Direction

In a report published Tuesday, Piper Jaffray analyst Andrew J. Nowinski upgraded the rating on Emulex Corporation (NYSE: ELX) from Neutral to Overweight, and raised the price target from $8.00 to $9.00.

In the report, Piper Jaffray noted, “Emulex followed through with previous plans to lower OPEX, committing to cut an additional $20M, while also initiating a $200M share repurchase plan ($100M by FY14). While we acknowledge that the Fibre Channel market remains in secular decline, we believe Emulex now has significant leverage in the model to deliver solid earnings growth, particularly if the company can leverage its comprehensive portfolio in the Ethernet market to drive top-line growth above current estimates. Therefore, with an improved cost structure and a more favorable capital allocation policy in place, coupled with a conservative top-line outlook, we are upgrading shares to Overweight and raising our price target to $9 (prev $8), based on 13x (unchanged) our new CY14E EPS.”

Emulex Corporation closed on Monday at $7.54.