I do not follow Ubiquiti Networks too close as I have no position in it, but it was on my watch list.
Looks like they are down about 3% in after hours. The quarter headlines posted a beat on the top and bottom numbers (according to the news headlines). Can anyone that follows this closely explain what the problem was? I am wondering if I should start to really dig into this for a possible position.
Low guidance for next quarter is the most likely cause (0.70 - 0.75 for Q4 2017 [compared to 0.69 for Q4 2016]). This indicates very little growth for this next quarter and a dramatic drop in growth compared to previous quarters. I am still waiting to read the transcript, but just based on the guidance numbers in the press release the best case scenario assuming a constant P/E is that the stock price would remain nearly unchanged for the next three months. If the market decides this is a permanent slower growth rate instead of a single slow quarter, the price is likely to drop.
In the transcript I would pay particular attention to their comments on the reason for the low guidance and any comments on the outlook for subsequent quarters.
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That’s exactly right… and if you look at the transcript you will see a few nuggets for why they had lower guidance. Pera pointed out that it due to higher R&D costs and a one time engineering milestone charge. I have no idea what the latter means but it’s clearly not because they aren’t selling their product. They added another buyback and are a consistent grower. I may add some shares if they continue to fall because with their growth and a P/E around 17 at $50/share it could get to bargain territory.
MC
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a one time engineering milestone charge. I have no idea what the latter means
From what they said it sounds like they outsource some R&D and are paying someone for completing a project on time and successfully.
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“it sounds like they outsource some R&D and are paying someone for completing a project on time and successfully.” - Saul
That’s pretty much the way I saw it, too. Revenues still growing, margins holding up well, more products entering growing marketplaces. Earnings take a slight hit as R&D and engineering expenses increase to produce that greater array of well-received products.
Gives me a chance to replenish my UBNT share count.