Yes it was a good call...What I liked is that management and investors finally seem to be on the same page.
We know sales are likely to rebound and possibly significantly over the next few quarters to a year or two...but it is the focus on cost and expenses and getting back to profitability that really matter...I think that was clearly the focus of yesterday's call.
Also I too was very happy to hear Jeff Bronchick from Cove Street himself on the call...As the largest shareholder he clearly carries some pull when it comes to Westel....He can really move the stock himself if he wants to.
So all in all so good news to build on...It is now down to execution.
Well you should only only design what the carriers really want...after all they are your main customers and will likely be footing the bill...So with R&D being on the high side of revenue you would expect there is a long term goal that will translate into revenue and net income...That will be Tom's job to explain to investors.
With that said year over year revenue comps have been up..... and revenue and comps going forward should be very favorable....I think my biggest question now is when are they going to be profitable?...It seems like much of the back end work has been done so with revenue likely to recover this year they should have some visibility as to when they will return to profitability.
Yes...R&D at 25% of revenue is just too high...To put it in perspective CommScope who I believe is the likely number 1 in DAS spends about $30 million on revenue of about $1 billion a quarter...or 3% on R&D.
Now I know that this is at the extreme but overall I think the Op Ex in general is just too high at Westell....and really this is one of the reason I keep talking about Westell being a take out candidate.
R&D is very important...but at some point you need to start generating return on all that R&D.
And general administrative expenses also seem high versus companies like WTT, RFIL who are both smaller than Westell or Adtran or CommScope who are both bigger than Westell....and all four of these companies are regularly profitable....So this is why I say they need to start focusing on being profitable...It should be very attainable especially as they should show better sales numbers going forward this year.
Yeah...Yr over yr sales have been looking much better lately...I do think that since they have been hitting 40% gross margins the last couple of quarters that they need to start focusing on profitability....I don't think anybody is asking for Intel or Microsoft gross margins and profitability....but there are companies with lower gross margins than Westell that still make a profit quarter after quarter.
I know they have been in the process of a lot of changes and could have been profitable in previous quarters because Tom has mentioned that...but it may be time to start showing a profit.
Also I expect to hear some good news going forward...It does appear that 2016 will be a good year in fro telecom vendors.
And while I'm at it here is an update on T-Mobile's Bing On rom an article by Diana Goovaerts of Wireless Week....A couple of lines and quotes from the article:
U.S. wireless carrier T-Mobile on Thursday said its Binge On video streaming service has led consumers to watch more than twice the amount of video content than they were before the service’s debut.
“Binge On is our most disruptive Un-carrier move yet,” T-Mobile CEO John Legere said in a statement. “It has literally changed the way millions of people are watching video – they’re watching more, more than twice as much as before, and most importantly, they’re watching without worrying about bigger bills or surprise overages!”
Actually my brother in law at a party this weekend asked me what I knew about Binge On...He is looking to move his family off Verizon and go to T-Mobile because of Binge On...I told him I thought Verizon was actually better overall...but it was his choice to make.
The bigger picture here though is that T-Mobile is dirtying a nerve and the other carriers are going to have to follow....More DAs and small cell!!
Here comes another DAS Killer coming from Facebook.....This will probably take a few weeks before it really shows up and starts doing damage but another video App that will likely take out many DAS sites that are not up to "speed."
In my personal opinion the carriers just are not keeping up with demand...and are really falling behind the curve.
Headline from an Associated Press article.
If you haven't noticed everything is down....there doesn't have to be a reason right now.
What I think is more interesting is there does not seem to be any rotation within the market...meaning investors are just hoarding cash assets....so in my opinion it is likely that in a month of so the market will have a major V shaped recovery as these same investors realize there is nowhere else to go with your money.
As for Westell the general move down over the last month has been on very low volume...so if there is any good news the recovery in the stock should be significant.
Also of significance is the stock and option grants for Rick Good...It sure looks like they are making sure he is taken care off...Of interest with him is that he has been with CommScope, TE...and as I mentioned before I think Westelll ends up being taken out by CommScope in the longer term so that may be a nice welcome home present for him should it happen...Just my opinion.
I would expect the stock to be significantly higher by the end of the year....This whole recent move down has been on very low volume with some days Westell not even trading 10,000 shares....So it is difficult to find any real meaning in the latest movement of the stock....At some point when better news is released the available supply of Westell stock will be tested....When that happens we could move up very quickly, even over $2 in very short order.
Also the overall market will be higher by the end of the year....The buybacks in the S&P alone have been averaging about $130 billion to $140 billion according to Factset's buyback quarterly....Apple alone bought $15.3 billion in Q3....Add in 401K's and you have a lot of money chasing a much tighter supply of stock....That does not seem like it will end any time soon.
Yeah...I think this is very positive news....Obviously they are very impressed with him if they gave him 180,000 RSU's and 120,000 options!!!!....He only owned 9811 shares up till then.
Also these awards and grants are on the level of the "C" tier...There is no way he gets these kind of awards unless big things are about to happen...In my personal opinion it sure looks like we are about ready to take off again...Should get interesting!!!!
Westell will be up sharply by the end of year...Really the whole market will likely be up by years end....There still is just to much easy money out there with rates remaining low and that is likely going to continue for quite a while....Too many company stock buybacks and too many 401K's that will suck up any extra supply of stock.....Especially now with the market in decline.
I guess an easier way to say it is...Where else you going to put your money??
As for Westell we struggled to get to 10,000 shares three days this week...Actually we didn't even get to 10K two of those days...Obviously Westell investors seem to be looking at brighter days ahead in my opinion.
Doesn't get much better than this...You have to start thinking that many of the cost are already in....As I mentioned these new subs are like pure profit to the bottom line from this point on.
Also again....like a smaller version of Nextel...A license to print money!!
I think that what will be the bigger issue this year is that the carriers have no choice anymore, they have to start building out these in building systems at a faster pace... and this has really been the issue for the last year plus but it is now getting far more critical.
What is changing is that it is really getting UGLY out there with customers and their in building solutions.
Customers expect their phones to work where they want and when they want...and I am not just talking about mom and pop and a couple of kids...Your at the point where large corporate, high profile customers need and have to have these in building systems in order to conduct business in many cases..It is now a necessity, not a privilege.
With that said I have been in the opinion and have said many times and still believe that the industry needs consolidation...I don't believe that should be any different for Westell...My personal choice is still CommScope who I believe is the leader in the DAS area..If the near far solution works like Westell says it does they may have something here worth acquiring....Just my opinion.
Well it didn't take long, about a month for T-Mobile's Binge On to run into trouble....Here is a quote from the Advocacy group the Internet Association.
Giving credit from an article in RCR by Dan Meyer.
“T-Mobile’s new ‘streaming optimization’ program appears to involve throttling of all video traffic, across all data plans, regardless of network congestion,” the group said in a statement. “The Internet Association applauds the FCC for seeking information on this practice and its potential harm on consumers and online applications and services. … The throttling practice was adopted alongside its Binge On program, which offers consumers and video services the option of removing data charges (‘zero-rating’) for video services. Reducing data charges for entire classes of applications can be legitimate and benefit consumers, so long as clear notice and choice is provided to service providers and consumers. However, a reasonably designed zero-rating program does not include the throttling of traffic for services or consumers that do not participate.”
Looks like You Tube is one of the primary issues....but again, throttling is not the answer to data management...DAS and small cell are the answer.
We currently have shares at the Bid of $1.36 (40,000 shares)...That is more than the total shares traded yesterday and today combined!!!...Like I said yesterday...I think when you see something like this it is probably time to move up the trading range....Just my opinion.
When the stock is ready to move it will get to $2 in a hurry...I believe I mentioned in the $1.10 to $1.15 area that this was where the easy money was going to be made..after that we did get to the $1.50 area.
As for now the volume here is saying it is time to move the trading range up again. Over the last month we were getting some better volume as the stock moved up through the $1.40's...Now back in the $1.30's we struggle to even get to 25K in volume...Basically nobody is going to be giving any kind of real shares in the $1.30's...Even the shorts have no interest down here in the current range with short interest down to 56,771 shares...I don't recall a Westell short interest number ever being that low.
So to sum it up again when the stock is ready to run it will likely move up in a hurry in my opinion.
Nextel went from a low of $2.53...to a $35 buyout from Sprint....What is funny is that I saw the same type of comments years ago about Nextel.
Sirius is just a smaller version of Nextel in my view...What will drive Sirius higher is the reoccurring revenue, sub growth and stock buybacks....That equates to a license to print money over the longer term in my opinion.
Also on a side note I'll promise one of my other pics...Westell (WSTL)...I Expect this stock to double...and possibly even triple over the next year as they push deeper into the in building wireless area...The run up has already started but it is still early...Also just my opinion...Do your own DD.
Don't fool yourself...This stock is likely going to $5 over the next year...The reoccurring revenue and sub growth along with the company buybacks will push it higher....As I have said before Sirius is at the point where it is a like a license to print money.
And as I have also said before Sirius is like a smaller version of Nextel...Which went from a low of about $2.50 to $35 where Sprint bought Nextel...I actually owned Nextel shares at $3 and many of them were taken in the $29 to $35 range...Not saying Sirius is going to $35 but we could see this stock start to accelerate asa it moves up.
I'll comment on some "optimistic views."...I think 2016 is going to be a very big year...and I expect to make a lot of money on Westell stock next year.....There are times in some stocks I invest in where I just know I am going to make money.
Stocks like Nextel years ago, Micron from time to time, Sirius satellite over the last few years...and from time to time Westell...This I think is one of those times again for Westell.
Here is an excerpt from a recent Martha Degrasse article discussing small cells with a quote from Marc Ganzi:
Ganzi recently made a big bet on heterogeneous networks with the purchase of ExteNet Systems. He told the audience at this year’s HetNet Expo that DAS and small cells will be a focus of carrier investment in 2016 and beyond.
“The total market will increase 5x by 2020,” said Ganzi. “As we turn the page into 2016, we believe all four carriers will be investing next year.”
Everybody has to do their own DD....But 2016 just looks like a rocket ready to lift off for wireless plays like Westell...Really over the last couple of months the company seems to be barely contain its optimism...and we have not seen that in a little while...Just my opinion.
I was on the call last night for the Westell presentation at the LD Micro Conference..I thought Tom did a great job laying out where Westell is now and where they expect to be over the next couple of years....Also I liked the tone of the call...Seemed very optimistic.
A couple of highlights were:
-Talk about DAS and how carriers may are still building out stadiums and may be "ripping out old ones and putting in new ones"...Which is a point that I have made frequently. In my view anything older than about 5 to 7 years likely is in need of repairs or obsolete.....And then there is significant new work and builds that will need to be done.
-Also mentioned DAS headends like Clearlink are much higher dollar, like 80% of the job versus conditioners that are like 5%-10%....So that should mean better margin and revenue growth.
He mentioned that theTransit Wireless and the NYC subway...So they are still getting some revenue from that?
And that they are getting neutral host work from American Tower, Crown Castle, Boingo and Mobilite....Additionally international seems to be growing.
Also they are looking at getting into "tunable filters"....May be an rf interference play there?
The CAF America fund....Seems like they expect some opportunities here too for revenue growth.
And then finally they may start to break out revenue in more detail or on a sequential and y/y basis...Really in my opinion what I took out of this presentation is that it is going to be a good run over the next couple of years for Westell.
With any good news I think next range will be closer to the $1.85 area....and then after that we get into the low 2's.
Westell has always been a momentum stock, meaning when things are good the moves tend to accelerate and become larger in size. Also the stock in my opinion is still in short supply.....Some we could see the stock up rather significantly over the next 3 to 6 months....It is not much of a stretch and we have seen this type of movement before.
I think we are about to enter another interesting time period for Westell stock. If history is any indication the upside move could be quite large....Just my opinion.