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Goldman Sachs Starts Ubiquiti Networks (UBNT) at Sell

December 19, 2014 9:07 AM EST
Get Alerts UBNT Hot Sheet
Price: $110.59 --0%

Rating Summary:
    4 Buy, 12 Hold, 4 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 7 | Down: 3 | New: 1
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Goldman Sachs initiated coverage on Ubiquiti Networks (NASDAQ: UBNT) with a Sell rating and a price target of $28.00. Analyst Kent Schofield noted potential revenue headwinds and increased opex.

"We expect emerging market challenges that have increased since Ubiquiti’s December quarter guide down will outweigh new product launches and channel distribution. Despite revenue deceleration, we think Ubiquiti will grow opex as a percentage of sales (particularly in R&D) as it attempts to capture a large addressable market (which we estimate at $7.1 bn) and moves up market within enterprise," said Schofield.

"Emerging economies produce a substantial majority of Ubiquiti’s revenues. In the current quarter, a basket of eight significant emerging economies’ currencies have declined the most qoq (-8%) versus the US dollar (Ubiquiti sells in USD) since at least 2012. We think Ubiquiti’s emerging market channel will hold less inventory in response to this volatility and implicit price increase. Meanwhile, we expect it will take a couple quarters for Ubiquiti’s wireless internet service provider (WISP) customers to test and deploy new airMAX point-to-multi-point products launched in mid-December. In the enterprise market, we think wireless local area networking (WLAN) market share gains will slow off of a large unit base and as initial new distribution benefits from Ingram Micro/ScanSource wane," continued the analyst.

"We expect new distribution in China/India to take time to ramp given less brand awareness. In our view, more difficult enterprise competition (relative to Ubiquiti’s core WISP market) will prompt additional R&D investment," he added.

For an analyst ratings summary and ratings history on Ubiquiti Networks click here. For more ratings news on Ubiquiti Networks click here.

Shares of Ubiquiti Networks closed at $33.66 yesterday.



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