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Here's Why Ubiquiti (UI) is a Healthy Investment Bet Now

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Shares of Ubiquiti Inc. (UI - Free Report) have surged 33.5% over the past year driven by accretive customer base and healthy revenues on the back of a flexible business model. Earnings estimates for the current fiscal year have increased 28.3% over the past year, while that for the next fiscal has moved up 20.4% since August end, implying its robust inherent growth potential. With healthy fundamentals, this Zacks Rank #1 (Strong Buy) wireless equipment manufacturer appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here

Growth Drivers

With the wide proliferation of Internet and exponential growth in demand for data traffic driven by bandwidth-intensive applications like video, audio, online gaming and social networking amid coronavirus-induced restrictions, the need for faster and seamless connectivity has increased manifold. In order to address these higher broadband access needs, wireless networks have emerged as an attractive alternative to traditional wired networks, as these require relatively lower capital investments and operating costs than the latter. New York, NY-based Ubiquiti perfectly fits this bill with a comprehensive portfolio of networking products and solutions. Its service provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing. Its enterprise product platforms offer wireless LAN infrastructure, video surveillance products and machine-to-machine communication components.

Backed by a rapidly growing and highly engaged community of service providers, distributors, value-added resellers, systems integrators and corporate IT professionals, referred to as the Ubiquiti Community, the company’s business model is highly flexible and adaptable to market demands. Ubiquiti maintains a proprietary network communication platform that is committed toward reducing operational costs by using a self-sustaining mechanism for rapid product support and dissemination of information by leveraging the strength of the Ubiquiti Community.

Ubiquiti aims to benefit from significant growth opportunities in both emerging and developed economies. These include a relentless pursuit by emerging countries to stay connected with the world through adoption of wireless networking infrastructure as developed economies aim to bridge the demand-supply gap for higher bandwidth.

Moreover, the company’s effective management of its strong global network of more than 100 distributors and master resellers has improved its visibility for future demand as well as inventory management techniques. The company has also made significant investments to optimize inventory levels by reducing lead times, meet increasing demand and support the growing number of customers. Ubiquiti follows a scalable community-led approach based on product feedback of customers while periodic reporting by channel partners has added to operational strength. We expect this resilient business model to contribute significantly to its growth momentum through disruptive price offering.

In addition, Ubiquiti spends significantly toward research and development (R&D) activities for developing innovative products and state-of-the-art technology to expand its addressable market and stay on the cutting edge of networking technology. The company believes its new product pipeline will help it increase average selling prices for high performance, best value products, thus raising the top line. It upgraded the UniFi ecosystem, which includes hotspot analytics and high-density WLAN improvements, and added new features to the AmpliFi product family. The company’s strategic product launches at disruptive prices helped it beat rivals to a great extent. Apart from launching products, reduction of labor-related costs also remains one of the chief highlights of the R&D initiatives. The company believes investments in R&D, inventory and operations management will help it expand the addressable market and maintain its dominant foothold in the industry.

The stock delivered a positive earnings surprise of 27.9%, on average, in the trailing four quarters, beating estimates thrice. With long-term earnings growth expectation of 18.4%, this stock appears to be an enticing investment option in the volatile market.

Other Key Picks

Some other top-ranked stocks in the industry are Aviat Networks, Inc. (AVNW - Free Report) , sporting a Zacks Rank #1, and Clearfield, Inc. (CLFD - Free Report) , and Sonim Technologies, Inc. (SONM - Free Report) , both carrying a Zacks Rank #2 (Buy).

Aviat delivered a positive earnings surprise of 11.8%, on average, in the trailing four quarters.

Clearfield delivered a positive earnings surprise of 44.3%, on average, in the trailing four quarters.

Sonim delivered a positive earnings surprise of 2.2%, on average, in the trailing four quarters.

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