Is Fusion-io Too High Risk?

With shares of Fusion-io (NYSE:FIO) trading at around $16.77, is FIO an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

It should be immediately noted that this article was prepared prior to Mizuho initiating coverage on Fusion-io and giving it a BUY rating. The second thing that should be noted is that this is a gutsy call on the part of Mizuho. Fusion-io relies heavily on three customers, which are Apple Inc. (NASDAQ:AAPL), Hewlett-Packard Company (NYSE:HPQ), and Facebook (NASDAQ:FB). Combined, these three companies account for 69 percent of revenue. If just one of them were to back out, you would see a steep decline in Fusion-io’s stock price in one day. If you like living on the edge, then Fusion-io is a great place to be. If you like to sleep well at night, then you might want to consider EMC Corporation (NYSE:EMC). It might not be as exciting, but exciting and safe rarely go hand-in-hand.

Fusion-io offers hardware and software that gets data closer to processing, which improves performance and efficiency. This led to massive success for Fusion-io for a period of time. But competitors are beginning to catch up. It has also been rumored that Seagate Technology Public Limited Company (NASDAQ:STX) might buy OCZ Technology Group (NASDAQ:OCZ). This would put Fusion-io in a difficult position.

Let’s take a look at some more important numbers prior to forming an opinion on this stock.