Aerohive Networks, Inc.: Initiation of Research Coverage

Tuesday, April 22, 2014

William Blair & Company initiated research coverage of Aerohive Networks, Inc. (HIVE $10.50) with an Outperform rating and Aggressive Growth company profile.

Analyst Jason Ader estimated that the company, which provides wireless networking equipment and solutions to midsize and large organizations, would generate revenue of $139.9 million in 2014 and $176.2 million in 2015.

“Aerohive is the fastest-growing publicly traded WLAN provider,” Ader said. “It had 50% annual growth in 2013 and is the fifth-largest vendor at 3% market share. Aerohive pioneered the concept of controllerless Wi-Fi, in which the need for dedicated WLAN controllers is removed by distributing controller functionality across the access points, saving capital and operational expense. Equally important, Aerohive offers public or private, cloud-based management for its systems to simplify the deployment and administration of wireless networks. Its solution particularly appeals to K-12 schools, which represent close to half of Aerohive’s revenue today, as well as middle-market organizations and distributed enterprises, all of which often lack resources or expertise in managing wireless networks. While incumbent vendors have increased their focus on the middle market, our field research continues to show Aerohive faring well because of its go-to-market focus and the simplicity of its solution.”

Ader continued, “We anticipate a rising tide in the WLAN space over the next few years, driven by the strategic shift to mobility-centric networking. Based on its market-leading technology and expansion into new verticals, we believe Aerohive is poised to be one of the fastest-growing suppliers and share-gainers in the $4.5 billion enterprise WLAN market. The cloud-managed aspect of Aerohive’s solution provides a recurring SaaS revenue stream, which we expect to become a material portion of the business in coming years. Considering Aerohive’s faster growth rate and margin expansion potential, we argue for a modest premium multiple for the stock, which currently trades in line with its peer group.”

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