I assume $120MM in 2013 revenue (high end of estimate given on CC), 64% GM and $81MM in opex, resulting in 2013 net loss of $4M on a GAAP basis ($-.22 EPS). In 2014, revenue also increases by 21% to $145MM with GM increasing to 65% and opex increasing to $84MM (mngt has actually decreased opex each of the last 3 quarters and will do so again in Q1 per CC), resulting in net profit of $10MM, or EPS of $.50 on a GAAP basis. On a non-GAAP basis (which Wall Street uses), EPS would be $.90 in 2014 since non GAAP expenses run around $8MM per year. I apply a 20 multiple to get to $18.
William Blair reinstates coverage on Meru Networks (NASDAQ: MERU) with a Outperform.
Analyst Jason Ader said while the stock is speculative based on its small size and lack of profitability, he believes it "provides an attractive, low valuation avenue for playing the red-hot enterprise Wi-Fi market."
The analyst said shares are trading at a "heavily discounted" 2013 enterprise-value-to-sales multiple of 0.65 times. Peers like Aruba (Nasdaq: ARUN) and Ruckus (Nasdaq: RKUS), trade at 4.1 times and 6.3 times 2013 sales, respectively, he notes
We don't need to be @ $18 for this to be good investment.... Cpl notes to your post:
1) GM% should be high 60's later this year (66-68) per cc commments
2) rev growth you projected is overly optimistic. I would assume 8-10% growth if you are projecting them achieving high end of rev guidance this year
3). Company needs to work on improving opex compared to revenue. Something is not right. That said, I would assume opex may be higher with your revenue model but in line if they grow 10%
I expect MERU to be $7-10 by Dec and would be happy with $6-9 by that time
1) My GM% est was for 2013 blended. High 60's later this year is a fair assumption.
2) My estimate of $120M this year is the high end of management's est given in CC (which was $110M to $120M). If your 8% est was right, I'd sell yesterday as that would only get 2013 revenue to $105M. You need to re-listen to the CC. The analysts have the est @ $115M (which is typical analyst behavior-picking the middle of mngt guidance).
3) Mngt stated in the CC that opex would come down nominally each quarter like it has in recent quarters. They have done a great job in limiting opex, something previous mngt proved incapable of doing.