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Netopia Inc. (NTPAE) Message Board

  • iletitride iletitride Apr 20, 2004 8:29 PM Flag

    Q3 Revenues & Earnings Forecast

    So lets look at Q3 revenues based on the comments from yesterday's conference call. The following numbers should be added to the $21.9 run rate from Q2:

    1. Over $2MM in sales deferred because of revenue recognition changes.
    2. $2-$3 MM in revenues projected per quarter from new customer (Belgacom).
    3. Assume $.5MM increase at Covad for Q3 versus Q2. Remember Covad ran aggressive promotions at end of the Calendar year (NTPA Q1) which accounted for lower than anticipated orders ($1.1 MM) in the first two months of Q2. NTPA management has indicated that March and April sales have improved.
    4. The Swisscom ramp-up during Q1 accounted for a customer inventory build. This carried over into NTPA's Q2. The shortfall in the Q2 runrate at Swisscom versus Q1 sales was $4.8 MM.These orders should moderate. Assume that 1/2 of the run rate difference is accounted for in Q3---This adds another $2.4 MM to revenues in Q3
    5. BellSouth contract referenced is all new. Assume $.5 MM for Q3

    This adds up to an $7.4-$8.4 MM increase in revenues for Q3. Add this to Q2 sales run rate of $21.9 MM and you get revenues of $29.3-$30.3 MM in Q3 Revenues. Imagine what earnings will look like. Remember company anticipates that SG&A will remain flat for Q3(This is something that they can control).

    Is this so difficult for the analyst to determine?---Probably not---but I think that they are so upset at NTPA management that they want NTPA to feel the pain.

    At the end of this calendar year, when all of the numbers are in, will yesterday's earnings shortfall even have a material impact on NTPA's prospects? ---Probably not---but for now NTPA will have to take its punishment.

    If I am right with these revenue projections, I would expect the analysts to slowly work their price targets up throughout the year, but nothing material until July earnings release--so buckle up!

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    • I think you pain a pictue that's too rosy. Swisscom "run rate"? Swisscom market is beginning to mature as indeed are other segments. But yes, new customers such as Belgacom help for sure.

      The company itself does not even think it can revert to profits until Q4 so I wouldn't be inclined to rush out now and buy on a possible misplaced hope that profits return in Q3. I consider profits in Q3 highly unlikely. Further, the return to profits in Q4 may contain the inherent assumption that Netopia will will big with Verizon in Summer. Given Netopia's small size and less than glowing ability to produce the goods - as in Q2 performance - there will be performance related issues that work against Netopia winning big this Summer. Best case in my view is that Netopia will be a small "second" supplier to Verizon, or maybe not a supplier at all.

      Additinally, 40% of all US households now have high speed access. The period of strongest growth is past. Serious slow-down will set in when the market hits 60%. That's not very far off i.e. much too close in fact to make a big-money gamble on Netopia when interest rates are climbing and Nasdaq is falling.

    • By the way, at $7.17 the forward P/S of NTPA is a very low 1.3. (I figure market cap $160M corrected for $27M cash divided by foward revenues of about $105M). A P/S of 2 or more is a no brainer so I could see NTPA at $10.50 to $12 in short order. It would probably base in that range for some time.

    • You're essentially correct. NTPA revenues over the past 8 quarters have been steadily up until this Q1 speedbump. It looks more like an aberration to me - for many of the reasons you stated. I don't expect an immediate return to Q4 revenues but rather something more like 26M to 27M. In any case, a less emotional mind can read between the ups and downs and see that a 20% to 25% annual rev growth pattern is still intact over more than 8 quarters. I'm ok with that. But some of our more nervous bretheren appear to be in a bit of a panic.

    • According to your analysis the company is doing just fine.

      According to your analysis when the stock was at 20 in January it was not supposed to go back to 11.

      According to your analysis the stock is inappropriately at 7.xx.

      According to your analysis noone should have bought this stock at any point in time over the past 12 months.

      According to your analysis this stock is just now hitting its stride.

      I have heard of people who slow down to look at car wrecks but you my friend must park, order a mobile home and lease the commuter lane for years at a time, just waiting for a wreck so that you can explain why it really did not happen.

      Paleeeeez

      Disclosure: something much stronger than 'strong sell' more approximating fraud

 

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