Computer Associates shares rallied up $4.25, or 20 percent, to $25.56 Thursday after Prudential Securities upgraded the stock from a “hold” rating to an “accumulate” recommendation.
Analyst John McPeake said BMC Software’s (Nasdaq: BMCS) positive pre-announcement likely signals a bottom for Computer Associates and the rest of the mainframe software sector.
BMC, which McPeake upgraded from a “hold” rating to a “strong buy,” shot up $6.31, or 41 percent, to $21.94.
“With CA's stock trading near 5-year lows, at the current valuation we think downside risk is limited,” he said in a research note.
Last quarter, Computer Associates (NYSE: CA) topped analysts’ reduced estimates, earning $321 million, or 54 cents a share, on sales of $1.68 billion.
First Call Corp. consensus expects it to earn 40 cents a share in its third quarter on sales of around $1.4 billion.
The stock moved as high as $79.44 in January before falling to a 52-week low of $18.13 in December.
Eleven of the 20 analysts tracking the stock maintain either a “buy” or “strong buy” recommendation.