the biggest red flag coming out of the MERU CC was the fact that the company is relying on 2nd half of 2014 for return to growth. Here are the questions...
1) Do they imply QOQ growth or YOY?
2) With Q1 missing significantly, what does it say about Q@? Seems week...
3) Why are they reducing SG&A expense to $27MM? Either they are looking to increase shareholder value and earnings leverage (good sign) or they are right sizing the business in the light of a tough 2014 outlook (bad sign).
I was planning on looking at internal buys as an indicator to jump back in but after seeing Larry Vaughn (VP Sales) unload a sizable position, it gives me little confidence that the outlook is bright.
+3% is hardly a runnup. In fact you might get a dip. The story is similar to Zhone but with Meru getting strong traction on their 802.11AC product (comparable to ZHNE's Fiberlan). They crushed Q4 resulting in a Q1 shortfall. Margins are 65%. They are right sizing the business to $27MM break even and will have better than industry growth in the second half of the year.
To me Q4/Q1 results are a wash.... but the story and their new products are gaining traction. Plus the valuation compared to its peers - its a steal at these levels.
Similar story to ZHNE, just a little ahead in execution on new product developments
Come on man - you gotta do some DD on your own. Listen to a CC - public info
Great rev growth and just achieved non-gaap earnings. 802.11c gaining significant traction and growth trajectory for 2014 looks solid.
Good way to diversify some Zhne until it starts picking back the momo
Only posting this here since CALX board is dead. Given that ZHNE's recent announcement indicates that US market will remain weak, any potential that CALX reports weak guidance and falls further, leading to long term buy opportunity?
Any Zhoners out there also invested in CALX? What are the thoughts out there in terms of relative valuation between the 2 now?
gotta be a buyout IMO. I have been buying since the mid 1's and accumulating upward. The ability to actually purchase a decent amount of shares with decent bid / ask spreads is reassuring.
This will be above $4.5 (my target for takeover) soon. Volume preceeds price.
I think we are getting close but wouldnt be surprised if we get to the mid / upper 3's. Worth reinvesting those $ generated from selling in the 6's and 5's. It is good investing practice to keep an open mind and not get married to a stock.
While I have been a long and strong supporter during this transitional period, there were several warning signs that I did not expect (from the CC). The tone had changed and forecast seems very iffy. The firection may seem intact but it sounded like they hit a bump that could affect the first half of the year (especially on the fiberlan traction side).
Analysts were asking questions and hoping for answers but couldn't quite put 2 + 2 together. I get the feeling that entering Q4, Mory & co were quite confident in their business and prospects. Listening to this call, quite the opposite...
1) Mgt cannot even commit to a single % growth in rev YOY when asked directly. They can only commit to EPS growth.
2) As analysts try to model revenue forecasts for 2014 and Fiberlan contribution, a huge red flag was raised. Many thought Fiber contribution is incremental to the existing modest growing base. Mory said this is not true and that Fiberlan will canabalize rev overseas
3) Mentioned the sales cycle is longer than expected which means first half 2014 doesnt appear to be strong
4) Guidance after the recent few qtrs seems light and momentum somewhat lost
Either mgt is being coy or there is a huge red flag that didnt exist in prior quarters. This position needs to be reevaluated for those in since sub $1 and above because it would make sense to lock in gains and wait for lower prices for re-entry.
After the wild ride from the $.40's and trading the way up, I am ready to let go my position in Zhone after hearing this past CC. After the Q3 report and tone heading into Q4, I was bullish on the prospects and eagerly awaited this Q's results...
I must say that the tone and outlook was very dull and there was some retracement in the commentary w/r/t to their prospects. That being said, after such a huge ride, I can keep an open mind that it is now time to let go of this multi-bagger. I sold a portion prior to earnings and will look to get rid of the remaining 90% after hours / tomorrow as long as it stays above 5. I see this going back to the $3-4 range in the next few months with hardly a catalyst until things change.
The guy on CC Q&A asking about the big dive after hours was amusing. Tells me that many have jumped onto this boat in anticipation of stellar results and the stock is above itself.
I thank ZHNE for the big gains and hope the success continues. At this point I will hold a small position in case I am wrong and will reevaluate in the coming qtrs. Best of luck everyone but I think the ride is over.
this is very good insight and appreciate you taking time in articulating this post.
it sounds like either mgt is lying about their Q4 prospects as they seemed very confident or they are relying on deals to close and rev rec within the qtr which isnt reassuring.
yep... it sucks but dont get sucked in and be patient. put in an absurd limit order @ like $4.09 and try to catch the rest of your trade at market on days like today.
i am looking for an awesome 4th qtr where we could see $6mm+ rev and with GM% back on track
Not that it was a blowout qtr but there are those pessimists out there that don't believe. How do those venture funds and institutions feel after waiting for the trough and dumping all those shares between jan - may?
The story is intact and people can still buy on the cheap after hours. While Mory's Q4 comments are obvious based on previous guidance, I am curious if there is a surprise be is holding for us on the CC?
pls have some perspective - the story here is fiberlan deployment. A single hotel deploying ZHNE's tech is meaningless revenue. Surprised this is a PR
I am long ZHNE
on a company that is turning the corner, it is very healthy and beneficial to have shorts that are skeptical. I see that adding more fury to the runnups and create a fuller or even overvalued situation when the fundamentals are sound.
I wouldnt expect someone to look at the current situation at ZHNE based on the past few earnings reports and guidance to have a desire to short. Some short a stock merely because the price has increased significantly in a short amount of time and many of us long timers are well aware that this was just a 'catchup phase' validating our purchase sub $1 and thinking there is much more to come.
I am taking the postiion with my remaining cost basis is $4.5 (even though it is $1.11) since I believe that is a conservative valuation for this company in its current state.