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After Airgain (AIRG) Priced Its IPO, Should Investors Buy?
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On Friday, San Diego-based antenna maker Airgain, Inc. (AIRG - Free Report) announced the pricing of its initial public offering of 1.5 million shares of common stock to raise $12 million. The price is set at $8 per share, before underwriting discounts and commissions, below the expected range of $9 to $10 dollars.
Airgain is expected to begin trading later on Friday under the symbol “AIRG” on the Nasdaq. Northland Securities and Wunderlich Securities acted as lead managers on the deal.
What is Airgain?
Airgain is the industry’s premier supplier of embedded antennas found in Wi-Fi routers and other electronic devices, including set top boxes, access points, residential gateways, media adapters, and digital televisions. The company also offers integration support and test services for the in-home wireless device market.
The company currently enables 125 million wireless devices in the market, and its portfolio includes over 330 high performance antenna products. Airgain also has more than 162 patents and applications worldwide.
According to Airgain’s website, “the goal of [its] proprietary design process is to achieve a minimum 30% real world OTA (Over The Air) performance improvement over competing antenna systems – providing differentiated performance for our customer’s products.”
Airgain is the only antenna manufacturer providing tuning antenna systems for maximum system OTA performance. They believe this is an integral step in designing antenna systems that results in the best possible device throughputs.
Should Investors Buy?
Financially, Airgain is in good shape. Having lost $270,000 last year, the antenna maker’s profits from 2011-2015 grew from $10 million to just under $30 million, and despite this loss in the first quarter of 2016, sales increased 49% in the same period compared to the prior year quarter.
Airgain’s potential market is huge, as it’s catering to the continually increasing demand for new technological innovations requiring maximum throughput: video streaming, media adapters, and access points, among others.
The company also believes that the Internet of Things (IoT) will offer a promising growth opportunity moving forward. Airgain is right to bet on IoT, as the industry and its devices is expected, over the next five years, to double to almost 12 billion.
In some way or another, IoT devices all rely on either Bluetooth, near field communication (NFC), or Wi-Fi, and these are the kind of technologies that need complex antenna systems, just what Airgain specializes in.
But potential investors need to consider some problems Airgain faces, which the company addresses in its prospectus.
One big cause for concern is that a considerable portion of Airgain’s sales are made by only a handful of customers; it’s top three clients in 2015 reflect 28%, 15%, and 12% of its sales, respectively. And, these same three buyers represented 34%, 15%, and 7% in the quarter ending March 31, 2016.
Airgain also pointed out that its supply chain management is fragile, as it relies on a small number of suppliers and distributers for its products. As said above, the company’s market is undergoing major development, and Airgain acknowledged the potential that it may not grow as favorably as it has been currently doing.
Other issues Airgain identifies include the amount its business depends on innovation, and how this cannot be guaranteed. The company also admitted that its “products are subject to intense competition, including competition from the customers to whom we sell.” In other words, Airgain’s own customers could out-compete Airgain in the very technological division that it is a leader in.
Bottom Line
The problems Airgain points out are something potential investors in the company need to seriously consider. But if Airgain can figure out a way to broaden its client, supply, and distribution base and tackle likely future competition, the company has a bright future ahead of it.
Interested in the other top stories of the week? Listen to Zacks Friday Finish Line to catch up on the week’s financial and investment news.
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After Airgain (AIRG) Priced Its IPO, Should Investors Buy?
On Friday, San Diego-based antenna maker Airgain, Inc. (AIRG - Free Report) announced the pricing of its initial public offering of 1.5 million shares of common stock to raise $12 million. The price is set at $8 per share, before underwriting discounts and commissions, below the expected range of $9 to $10 dollars.
Airgain is expected to begin trading later on Friday under the symbol “AIRG” on the Nasdaq. Northland Securities and Wunderlich Securities acted as lead managers on the deal.
What is Airgain?
Airgain is the industry’s premier supplier of embedded antennas found in Wi-Fi routers and other electronic devices, including set top boxes, access points, residential gateways, media adapters, and digital televisions. The company also offers integration support and test services for the in-home wireless device market.
The company currently enables 125 million wireless devices in the market, and its portfolio includes over 330 high performance antenna products. Airgain also has more than 162 patents and applications worldwide.
According to Airgain’s website, “the goal of [its] proprietary design process is to achieve a minimum 30% real world OTA (Over The Air) performance improvement over competing antenna systems – providing differentiated performance for our customer’s products.”
Airgain is the only antenna manufacturer providing tuning antenna systems for maximum system OTA performance. They believe this is an integral step in designing antenna systems that results in the best possible device throughputs.
Should Investors Buy?
Financially, Airgain is in good shape. Having lost $270,000 last year, the antenna maker’s profits from 2011-2015 grew from $10 million to just under $30 million, and despite this loss in the first quarter of 2016, sales increased 49% in the same period compared to the prior year quarter.
Airgain’s potential market is huge, as it’s catering to the continually increasing demand for new technological innovations requiring maximum throughput: video streaming, media adapters, and access points, among others.
The company also believes that the Internet of Things (IoT) will offer a promising growth opportunity moving forward. Airgain is right to bet on IoT, as the industry and its devices is expected, over the next five years, to double to almost 12 billion.
In some way or another, IoT devices all rely on either Bluetooth, near field communication (NFC), or Wi-Fi, and these are the kind of technologies that need complex antenna systems, just what Airgain specializes in.
(For more information on IoT, read our article “How to Invest in the ‘Internet of Things’.”)
But potential investors need to consider some problems Airgain faces, which the company addresses in its prospectus.
One big cause for concern is that a considerable portion of Airgain’s sales are made by only a handful of customers; it’s top three clients in 2015 reflect 28%, 15%, and 12% of its sales, respectively. And, these same three buyers represented 34%, 15%, and 7% in the quarter ending March 31, 2016.
Airgain also pointed out that its supply chain management is fragile, as it relies on a small number of suppliers and distributers for its products. As said above, the company’s market is undergoing major development, and Airgain acknowledged the potential that it may not grow as favorably as it has been currently doing.
Other issues Airgain identifies include the amount its business depends on innovation, and how this cannot be guaranteed. The company also admitted that its “products are subject to intense competition, including competition from the customers to whom we sell.” In other words, Airgain’s own customers could out-compete Airgain in the very technological division that it is a leader in.
Bottom Line
The problems Airgain points out are something potential investors in the company need to seriously consider. But if Airgain can figure out a way to broaden its client, supply, and distribution base and tackle likely future competition, the company has a bright future ahead of it.
Interested in the other top stories of the week? Listen to Zacks Friday Finish Line to catch up on the week’s financial and investment news.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>