SAN FRANCISCO (AP) -- Informatica Corp.'s stock rallied Monday after an analyst raised hopes that the business software maker may be poised to bounce back from a recent string of financial letdowns.
THE SPARK: Piper Jaffray analyst Mark Murphy on Monday upgraded his rating on Informatica to "Overweight" and predicted the company's stock could hit $36 within the next year. His previous price target was $28. Shares closed Friday at $29.36.
THE BIG PICTURE: Informatica, which is based in Redwood City, Calif., has been hard hit by a sharp drop in its European business. The company's management blamed the trouble on economic uncertainty caused by the crippling government debt problems in several European countries, but Murphy and other analysts think Informatica brought on some of the misery with its own poor execution.
Enthusiastic investors had driven up its stock price amid Wall Street's fervor for technology that helps analyze and organize the torrent of digital data pouring in from the Internet and mobile devices. Informatica sells some of these so-called "Big Data" services.
THE ANALYSIS: Murphy's optimism marked a change from his mostly negative opinion about Informatica's prospects during the past two years. As the company began missing earnings projections, Informatica's stock dropped more than 50 percent since the price hit $62.42 in July 2011.
Based on surveys for corporate technology spending plans for next year, Murphy now believes Informatica's business has stabilized and suspects the company's revenue could grow slightly faster than investors' now-subdued expectations. The average forecast among analysts polled by FactSet currently calls for Informatica's 2013 revenue to increase by 9 percent to $867 million.
SHARE ACTION: Informatica's stock added 72 cents, or 2.5 percent, to $30.08 in afternoon trading. The shares have traded in a range from $23.83 to $54.49 during the past year.