Ubiquiti Networks is a communications technology Company. Ubiquiti specializes in wireless communications with a mix of wireless networking products and solutions. The Company is headed by the brilliant Robert Pera. Mr. Pera owns some 60% of the Company as well.
A down and dirty fundamental analysis shows us a Company trading 18.20 the trailing 12 months earnings with a projected 18% earnings growth in the next 12 months. Numbers like that give the Company a PEG ratio of .79. Very cheap fundamentally. The Company has a net profit margin of 30.90 percent. Sounds good, right? Institutionally, the business is unloved, with only 31% large block ownership. Management effectiveness is above reproach as well, with return on Equity sitting at an amazing 73%. Why? Does Mr. market think a Company that has grown earnings at 78% over the past Five years can’t grow next years earnings at 18%? Is it the inventory build? Is the world giving up WIFI, the internet? I do not know. I do know I will pay 13 times next years earnings, unless of course the facts change.
Short Interest- Short sellers have been shorting the hole with Ubiquiti since the highs in March. Short interest has grown all year, and as of September 15th sits at 30% of of public float, or roughly 8 Million shares. Boy, thats quite a pile.
11 Month Chart-
Aside from a failed break-out in February and a failed break-down in may the shares have stayed in a range between 35 and 48. We are currently at the bottom of that range. If this timeframe meets your trading plans break below puts a hold on the trade long. Risk on this timeframe is easily defined.
2 year Chart-
Looking at the two year chart we see the same range easily defined. We also see further a further support around 30 with two tests in the last 13 months. Below 30 is a wait and see for a trader, as risk doesn’t become defined again until the 21 range. We also see a trend in RSI on this timeframe. UBNT has not been truly oversold on this timeframe, at least from a traditional “30 is oversold theorem. Three times in the last two years an RSI of 40 has shown us a buy point. We are at that point now.
3 year Chart-
On a three year chart we see similar levels as the two year and 11 month. We see our “box”, or recent range of 35-48 confirmed. 35 has proven to be a key level on this timeframe as well. We also see a broken trend on this timeframe. The trend dating back to August of 2012 was broken this September. We are also at the previously mentioned 35 support. If this break-down fails, I will add to my position. If it fails, 30 is the next defined support. Below 30, on all times frames I hit a mental stop, and will close my position. Last item of note on the time frame is the trend in Money Flow at the bottom of the chart. The trend, since the 2012 bottom has been up. We are at trend line support. A break below this is also worrisome.
Fundamentally, I believe Ubiquiti is a great Company. Technically, I believe you must wait for confirmation before opening a position, or liquidating your current one.
Disclosure: Long Common Stock, Short Leaps.
Disclaimer: Do your own due diligence. I am crazy, and I might be wrong. All information gathered from FINVIZ, StockCharts, and NASDAQ.