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Bull of the Day: Ubiquiti (UBNT)

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Ubiquiti (UBNT - Free Report) develops networking technology for service providers and enterprises worldwide. The company’s service provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems, and routing; and enterprise product platforms provide wireless LAN infrastructure, video surveillance products, switching and routing solutions, and machine-to-machine communication components. Ubiquiti was founded in 2003, is based in San Jose, California and has over 500 employees. The stock is Zacks Rank #1 (Strong Buy) and todays Bull of the Day.

Ubiquiti has a market cap of $4 billion with a forward PE of 18. The stock sports Zacks Style Scores of “C” in both Value and Growth, but “A” in Momentum. The company sits in an industry that is ranked 49 out of 265 (Top 18%) in the Zacks Industry Rank. Q1 earnings and guidance were impressive and the recent dip in the stock is a buying opportunity.

Q1 Earnings and Guidance      

Ubiquiti released its third quarter earnings on November 3rd with a 32% beat. The company reported $0.79 verse the $0.69 expected. Revenue came in at $204.8 million verse the $185 million expected. Gross profit was seen at 48.0 versus the 48.3% seen last quarter.

In addition to the earnings beat, the company raised guidance for the second quarter. They now see a range of $0.73-0.79 verse the $0.69 expected. Revenue is now expected at $200-210 million verse the $188 million expected.

Stock Reaction

Traders reacted very positively to the numbers at first, sending the stock up 15% after hours. However, the next morning the stock lost almost all of its gains. This was likely traders taking profits after a nice run up in the stock. Looking into estimates, they might regret taking profits, as analysts are taking estimates higher.

Estimate Revisions

Since earnings, estimates have ticked higher across all time frames. For fiscal 2017, estimates have come up over 11% over the last 7 days, going from $2.66 to $2.96. For the current quarter, there has been a 13% jump, from $0.66 to $0.75. Earnings will next be reported on February 2nd, where the company will go for its ninth straight beat.

8 Straight Beats

Looking at the charts, the stock is now back to 2014 highs and looks to breakout above those levels. After basing in the lower $30s the stock exploded higher after fifth straight EPS surprise to the upside. Now three beats later, the stock is ready to charge into 2017 at all-time highs.

Moreover, the stock is currently holding its 50-day moving average and as long as it holds its post-earnings low above $50, it should grind higher. 

In Summary

Ubiquiti’s impressive earnings past has investors salivating for all-time highs. Look for the stock to grind back to post-earnings highs and threaten the $60 level before the next earnings report in February.

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Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, they should be removed immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>.


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