Today’s 2014 Top Picks update puts the original recommendation in buy/hold status and offers a new pick for the rest of the year.
Ubiquiti (UBNT)
from BI Research
Ubiquiti (UBNT) is truly a disruptive, R&D-focused, wireless networking company. 65% of employees are engineers who are hands-on and actually designing networking products. Its products are so good that it has sold over a billion dollars’ worth of them in the past few years—without a sales force, just via word of mouth and its 250,000 user community.
The Company recently reported results for fiscal Q3 ended 3/31 with a $.01 beat in adjusted EPS which came in at $.50, up 108% over last year and revenues of $148.3 million that were up a whopping 78% and beat estimates by $6.4 million. Also guidance for the quarter ahead comfortably bracketed the current consensus.
As best I can determine, investors were miffed that earnings didn’t beat estimates by a wider margin, that guidance wasn’t raised, (even if in line with analysts’ existing estimates), and that Q2 is not showing much if any sequential growth over Q1 (the Company notes the second half should be the stronger half based on new product launches and quarterly growth can be lumpy), and that inventories doubled just over the prior quarter—on a 7% sequential increase in sales.
Sales in the quarter were $148 million, already up a mind-boggling 78% and exceeded expectations by $6 million! I believe the sell-off was way overdone. And if investors think that growth slowing to 50% in the current quarter, as already predicted by analysts (guidance is right on their estimates), is a reason to sell the shares down to a PE of 19, well, that’s just as illogical in my opinion. Management agrees and announced a $75 million stock buyback. That said, analysts are cautiously predicting only 15% growth in EPS in FY6/15, yet are at 32% for long term growth, and the BI Rank slipped to a borderline 8.0, which leaves me between Hold and Buy. (from the June 11, 2014 BI Research update)
Tom Bishop, BI Research, www.biresearch.com, July 15, 2014