3Com Corporation (COMS) has become a leader in the Chinese enterprise networking market. We are concerned about the future of COMS business in China as it reduces its dependence on Huawei as a reseller, which contributes close to a quarter of revenue.

However, Huawei revenue is slowing at a slower rate than expected. With improved results in 2008 and in the first quarter of 2009, we believe current holders of COMS shares would be better served by holding the shares for a more attractive exit point. We therefore maintain a Hold rating on the shares of 3Com. Ever since the failed acquisition by Bain, COMS shares have fallen to a price level well below the price they were trading at before the announcement. The company has since attained profitability on a non-GAAP basis and posted strong growth in China. With strong operational results in 2008 as well as in Q109, we believe the company is showing strength in its ability to sustain recent improvements. Our target price of $2.50 represents a P/E multiple of 7.6x estimated fiscal 2009 EPS of $0.33. Read the full analyst report on COMS Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all today?s Analyst Blog entries.

Source:Zacks Investment Research