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Why Shares of Sonus Networks Inc. Rose 10% in June

What happened

Shares of Sonus Networks (NASDAQ: SONS) gained 10.2% in June 2017, according to data from S&P Global Market Intelligence.

So what

The month started on a high note, as analyst firm William Blair upgraded the stock to a buy based on the potential value of the GENBAND acquisition. The network-based communications specialist kept the good times rolling as Sonus added Palo Alto Networks' (NYSE: PANW) high-security firewall functions to its session border controller products, a move inspired by rising numbers of denial-of-service network attacks.

Image source: Getty Images.

Now what

Keep in mind that investor response to the GENBAND buyout was the reason for the poor performance of Sonus shares in May. The deal will be financed partly by freshly printed Sonus stock, diluting the stakes of current shareholders by roughly 50%. But that pain is already priced into Sonus shares, which are now trading at a bargain-bin 5.3 times forward EBITDA. The security twist caught many observers off guard, since it combines the core strengths of two companies that often bid against each other for the same contracts.

All told, Sonus investors have enjoyed a 21% year-to-date gain, and the stock still looks affordable. Expect share prices to keep trending higher as the GENBAND merger unfolds.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.