UBNT New Products

Investment Analysis Clubs Saul’s Investing Discussions
21

I found my records, from the new face of Yahoo! portfolio (that has some difficulties) but this is an improvement. It was the summer of 2014 that I looked around UBNT, and even bought some to try it on (and then took it off). Probably for more MAKO or Tesla or something like that.

Anyway, the share price today is about the same as it was when the stock was first brought to my attention.

So that is where my perspective is coming from. Even if one had sold at the top about 6 months ago or so, your total returns from the summer of 2014 to the date you sold would have materially trailed many of the other stocks that we discuss (ones like NVDA and SHOP and VEEV and TSLA (albeit SHOP and VEEV were not yet public at that time).

It is within this context that I have formed my opinion on UBNT. NVDA, SHOP, VEEV, and TSLA are all stocks that can persuasively be argued as either great or likely to be great, singular even, companies. That is where my focus is, and that is a category that I don’t think UBNT can fit into. And having to make decisions yes or no, often on good choices, that would leave UBNT out of the concentric circle portion of Yes for me.

If sales start to Tornado, so that it become evidence that UBNT is actually starting to disrupt, and not just sell into niches, the enterprise market, then I will reconsider. Until then, it just won’t make it beyond a company I know and follow.

Thanks guys though for your perspectives and information. I am just adding mine, from my own particular investing perspective. This is one of those requirements. Even in the failures. Twilio, as an example, is still clearly the leading API communication company in the world, singular even, but like I did with UBNT in 2014, I tried it on, sold and bought it back again a few times, as it just did not feel right (Saul had a similar process with it) and moved on. And as we saw the CAP for TWLO may not be what was hoped.

So being singular and great is not the only criteria, but it is one that I try to stick with. May also be why I date very few women (then again, I may be getting pity dates is more probable ;), but I will see it from my perspective).

Tinker

2 Likes
22

I feel there is a discrepancy here and the market is missing the future potential of the company.

The company has posted decent financials, growth, has a committed founder, company buying the stock back, huge short interest, yet the stock is not going anywhere. Why?

I think the market is not convinced UBNT’s current operational model is sustainable or scalable. As an individual investor you may consider that model as a differentiator, one that allows higher margin, and a good thing. But an enterprise buyer, IT department, would be skeptical of a company that relies on community for regression testing of their products. Unfortunately the founder is too stubborn to accomodate or alieviate the enterprise market’s concern by investing bit more on internal operations. They are making some changes but the analyst’s are rightfully concerned UBNT’s ability to break further in Enterprise Market means they have to invest more in their operations, support infrastructure, more on product testing, etc and the company has to accept a margin hit.

So far, the company is not making any changes. At somepoint either the growth will stall and the company changes or the growth continues in existing model and UBNT proves their current model can scale.

Until such time the stock is not going to see higher multiples. How long this will take? more than few quarters. In the meantime the stock could move up on some short covering, earnings only to trace back the gains it made, or will be in a sideways market for few years. You may think it will resolve much earlier, but I have seen many stocks going sideways for years. So be prepared for dead-money.

3 Likes
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<<<I think the market is not convinced UBNT’s current operational model is sustainable or scalable. As an individual investor you may consider that model as a differentiator, one that allows higher margin, and a good thing. But an enterprise buyer, IT department, would be skeptical of a company that relies on community for regression testing of their products.>>>

Kingran,

I think you hit it right on the head why, despite good numbers, that the market still gives UBNT a small multiple, relative to other companies with similar numbers.

As a business owner, downtime is far more expensive than paying more for the whole product through a company like Cisco that you know is going to work, and if it does not, you know dang well it will be replaced or fixed, or patched, or otherwise immediately serviced.

Shall watch to see if UBNT can overcome this issue.

Tinker

24

Pera mentioned Spiceworks the last two calls I believe. It is a free site where wireless junkies share info on their favorite gear. I took a look at it for reviews on the new access points. They all said the same thing about Ubiquiti. To the effect of, “It can’t be that good because the price is too low.”

Except they were talking about the problem with the old access points. Most of the posts gave high remarks to the new access points saying they perform incredibly well. Moreover, they believe the higher price point validates their move upward into enterprise.

Again, we will see and I don’t know what will happen. What I do know, is enterprise has grown rapidly for the past several quarters.

Take care,
AJ

5 Likes
25

<<<I think the market is not convinced UBNT’s current operational model is sustainable or scalable. As an individual investor you may consider that model as a differentiator, one that allows higher margin, and a good thing. But an enterprise buyer, IT department, would be skeptical of a company that relies on community for regression testing of their products.>>>

To address precisely this … company has lunched UniFi Elite:
https://community.ubnt.com/t5/UniFi-Wireless/UniFi-Elite-Clo…

This also has far greater potential for recurring revenue. Once there is evidence of this gaining traction, I believe stock price can explode.

On a cautionary note - transition from wisp providers to UniFi was not smooth and we had a few qurters of stagnation. But over 3 years evidence is clear - it is a huge success. So more patience may be required and expecting upwards movement in near term may not happen. Good thing is stock is cheap, so unless upended by competition (unlikely) downside potential is limited.

About stock price not moving up - I have seen this before. At one point all of my major positions then were moving up every day. But UBNT was moving in opposite direction. And at some point in 2016 it was vice versa and was my most stable and performing stock.

4 Likes
26

Seems that as of Thursday (6/1), the market’s thoughts on Ubiquiti might have started to turn around a bit. It is back over $50/share here early this morning (6/5).