Zacks bull of the day: Ubiquiti Networks

The tech company recently crushed earnings and moved up guidance in a meaningful way.

By Zacks.com Aug 15, 2013 3:17PM

copyright Epoxydude, Getty Images, Getty ImagesUbiquiti Networks (UBNT) recently crushed earnings and moved up guidance in a meaningful way. The stock is our bull of the day as a Zacks Rank No. 1 ("strong buy").


If you are not a regular reader of "Zacks bull of the day," maybe you'll change your mind after reading this: On May 31, we highlighted UBNT a as the "bull of the day." Since then, UBNT is up 51%.


Company description

Ubiquiti Networks is a communications technology company that offers a portfolio of communications networking products and solutions in the outdoor wireless, enterprise WLAN, video surveillance, wireless backhaul, and machine-to-machine communications markets worldwide.


Earnings history

A recent earnings report was met with exuberant buying on Wall Street. The June 2013 quarter was reported on Aug. 8, and the following day saw the stock jump 28%!


It was the third beat in a row, following positive earnings surprises of 5.2% and 4.5%. The most recent positive earnings surprise was a notch higher, 18.5% to be exact. Revenue has grown dramatically over the last four quarters. Starting with the September 2012 quarter, the company posted $62M, but the next quarter saw an increase to $75M. The March 2013 quarter was another kick higher to $83M and the most recent report had revenue ramping to $101M. 


Guiding higher

It is one thing to beat earnings three quarters in a row, it is quite another to do so with a blisteringly strong quarter that included an improved outlook.


UBNT raised guidance in a meaningful way, and as a result the stock has caught fire. Since the day before earnings, the stock is up approximately 33%.


After reporting about $101M in revenue in the most recent quarter, management guided to a range of $116M to $122M. This range was well above the expectations on Wall Street.


Earnings estimates launch higher

Following the recent beat and earnings guidance, analysts have been busy moving their numbers higher. The Zacks Consensus Estimate for 2013 was $1.13 prior to the earnings report, but now stands at $1.46. That is a dramatic move higher.


This increase in estimates is not limited to 2013. The Zacks Consensus Estimate for 2014 moved from $1.29 to $1.81 in a mega move that could certainly carry the stock higher into 2014.


Valuation

Growth like this isn't cheap... unless you are buying UBNT. One metric jumps off the page to me is the forward earnings multiple that UBNT carries compared to the industry average. At a mere 19.7x, UBNT trades at a discount to the 22.6x industry average, despite all the earnings growth of late. The price to book multiple of 22x would make a value investor choke, but this story is all about growth. The company is expected to report 45% growth in fiscal 2014 year and then 27% growth in the next fiscal year. That compares to -4.3% and 5.7% respectively for the industry average.


The chart

The chart for UBNT, especially over the last three months shows some serious movements. The dip from May into June was the result of a secondary offering that took nearly 20% of the value off the stock. Needless to say, investors got that all back and then some. The idea here is that growth is going to continue for the next several quarters.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Brian Bolan is a Stock Strategist for Zacks.com. He is the editor of the Zacks Home Run Investor service and Breakout Growth Trader.

 
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