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Bull of the Day: Ubiquiti Networks (UBNT)

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Based in San Jose, California, Ubiquiti Networks (UBNT - Free Report) is a company that designs, manufactures, and sells broadband wireless solutions worldwide. Its products and solutions include radios, antennas and management tools and other applications in the unlicensed radio frequency spectrum.

Impressive Q1 Earnings

Back in November, Ubiquiti announced better-than-expected fiscal 2019 first-quarter results, beating expectations for the third straight time thanks to its growing Enterprise Technology business.

Adjusted earnings of $1.17 per share beat the Zacks Consensus Estimate; net income was $86.2 million.

Gross margin hit 46.5%, up from 45.4% in the year-ago period.

Revenues of $283 million also beat our consensus estimate, and increased 15.1% year-over-year. Notably, enterprise technology segment revenue soared 41.3% to $177.9 million, and this includes the UniFi, mFi, and Ubiquiti’s consumer-centric AmpliFi and FrontRow products.

Looking at revenue by geography, North American revenue climbed 24.1% to $119.4 million while EMEA revenue increased 33.9%.

Management didn’t hold a conference call with analysts, but stated again that gross margin is expected to decline to between 42% and 45% in the near term due to tariffs on products imported from China.

They did add that it expects "mitigating the effect of the tariffs in the long term and therefore our long-term gross margins are expected to remain between 45% to 50%."

Price Performance & Rising Estimates

Over the past 12 months, UBNT has gained almost 43%. And in the last six months, shares have jumped over 30%.

Estimates have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, Ubiquiti’s earnings are expected to grow around 11.7% year-over-year. The Zacks Consensus Estimate has moved 24 cents higher in the past 60 days from $3.88 to $4.12 per share.

Next year looks pretty strong too. The consensus estimate sits at $4.29 per share, with two upward revisions in the last two months.

Bottom Line

Ubiquiti also reiterated its previous outlook for full-year revenue between $1.1 billion to $1.2 billion, with EPS in the range of $4.00 to $4.80. Additional tariffs could drag full-year earnings to $3.65 or lower, however.

But, given UBNT’s strong stock performance during that volatile run recently from the broader market and other tech stocks, the company is on a good path going forward, and looks to continue its outperformance. For those investors looking for a technology stock to add to their portfolio, UBNT should definitely be on the shortlist.

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