Fusion-IO Rockets: Morgan Stanley, Credit Suisse Pound the Table

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Shares of enterprise storage technology provider Fusion-IO (FIO) are rocketing today, up $2.85, or almost 12%, at $27.05, and at one point as high as $27.94 after the stock got two new thumbs up, from Credit Suisse and Morgan Stanley.?

Morgan Stanley’s Katy Huberty raised her rating on the shares to Overweight from Equal Weight, with a $30 price target, writing that a recent slump in the shares, prompted by the lock-up expiration on share sales following the company’s June IPO, presents investors with an opportunity to own the leader in enterprise flash storage technology.

It’s possible that that market may triple this year, writes Huberty, based on a survey of corporate CIO buying intentions. And she thinks there’s a lot of business in the company’s pipeline that’s not yet reflected in Street estimates:

Fusion-io is well positioned to ride the surge in enterprise flash given its leading market share, recent low-cost product introduction (ioDrive2), and growing partnerships / distribution, in our view. Our $30 price target applies an 8x EV/Sales multiple, upper-end of comparable data center peers, to our CY12 revenue estimate of $372M. We believe our estimates are conservative, especially if FIO converts new accounts in its pipeline that have the potential to be multimillion customers. We believe conversion of new revenue in current and pipeline accounts could at least double our CY12 revenue estimate.

Cre dit Suisse’s?Kulbinder Garcha reinstated coverage of the stock today with an Outperform rating and a more aggressive $50 price target. Like Huberty, Garcha thinks estimates are too low.?

The appeal of the company’s technology thanks to its ability to cut costs is greater than people may realize:

For traditional enterprise, Fusion-io SSDs, when coupled with IO Turbine, reduce cost per virtual machine to one-third to one-sixth current systems. Given the impressive ROI, Fusion-io sales is already seeing traction with the solution. On the Web 2.0 side, the company benefits by helping clients accelerate content distribution. Within this, management feels confident in organic customer growth, the potential for refresh cycles, brand and solid relationships within accounts. Indeed, the F3Q12 lower margin guidance (50% vs. 56-58% long term) is likely a result of rapid adoption of the next generation ioMemory solution at a large customer. Based on our account by account analysis, we believe the revenue potential over the next 12 months could be meaningfully higher than our and Street estimates.

Garcha is estimating $321 million in revenue in the fiscal year ending this June, and 19 cents EPS. That compares to an average Street estimate of $316 million and 26 cents EPS.?

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