Bert just wrote a UBNT article on Seeking Alpha on their recent earnings, but look quickly before they restrict it to SA Pro…
Ubiquiti reported the results of its fiscal Q2 late last week.
The headline EPS number was a miss, and the shares pulled back sharply.
The non-GAAP EPS miss was entirely a function of an inventory write-off of a misbegotten consumer camera offering.
The company’s core business in the wireless LAN space continues on a positive trajectory with continued noticeable market share gains.
Excluding the inventory writedown, Ubiquiti showed a noticeable gross margin progression, confounding skeptics who do not believe in this company’s disruptive pricing and product strategies…
At the end of the day, Ubiquiti shares are cheap if you believe that the company can sustain its business model, and not worth considering for any other reason. It is basically an on/off paradigm. The company has a current share price of about $72, and outstanding shares reported last quarter were 77.6 million. That yields a market capitalization of about $5.6 billion. Cash on the balance sheet was $823 million at the end of the quarter. That yields an enterprise value at around $4.8 billion. The company is forecasting that in the current fiscal year, sales will reach $1 billion, and over the coming calendar year, I think sales are likely to be about $1.1 billion. Thus, the EV/S ratio is 4.4X - somewhat elevated for an enterprise IT hardware company, and quite inexpensive given the company’s business model…
I do not expect UBNT shares to be without their drama over the coming quarters. That seems to be an inherent component of life at this company. But I am one who thinks the business model of this company has been, and will continue to be, successful. Ubiquiti is able, because of its development format, to often produce both disruptive products and sell those products at a disruptive price/performance levels. And it continues to be able to get its own user base, through its Community, to handle the heavy lifting of marketing. I think the shares will produce positive alpha over the coming years.
At the end, we find out that Bert is now long UBNT again