Why Casa Systems Stock Popped Today

What happened

Shares of software and infrastructure solutions company Casa Systems (NASDAQ: CASA) jumped on Tuesday following an analyst upgrade. The stock was up about 8.7% at 11:30 a.m. EDT after being up as much as 15% earlier in the session.

So what

Morgan Stanley boosted its rating on Casa Systems stock Tuesday morning. The investment bank now rates the stock as overweight, equivalent to a buy rating. That's up from a previous rating of equal-weight.

This upgrade comes after a volatile few months for the stock. Casa Systems went public late last year and more than doubled in the first three months of 2018. The stock held its ground through mid-April, but it's been moving downward ever since. Prior to Tuesday's surge, shares were trading just a few dollars above the IPO price.

Now what

Casa Systems is a profitable company, producing net income of $17.8 million on $89.1 million of revenue in the first quarter. It's also growing quickly, with first-quarter sales up 22.5% year over year. However, the stock's valuation may have gotten ahead of itself earlier this year. At its peak, Casa Systems was valued at around $2.7 billion, a lofty total for such a small company.

Shares could certainly recover, but it will likely take a string of solid results in the coming quarters.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.