) didn't make enough noise when it came public, and the noise it
has created at earnings hasn't exactly been music to investors
ears. Still, it is a Zacks Rank #2 (Buy). It is the Bull of the
Making a Connection
Recently, analysts are both Deutsche Bank and William Blair noted
that the WLAN space was seeing some positive purchasing trends. The
idea of constrained IT budgets did not come up nor did customers
waiting for the latest and greatest technology.
With the way things are going, investors who are looking at the
long term might even see a budget flush at the end of this year.
The budget flush happens when a business manager spends all
available budget all at once to make sure that next year they get
an equal amount of budget or more depending on success.
Ruckus Wireless provides Wi-Fi solutions. The company offers
SmartCell Gateway, a platform to support and manage its Smart Wi-Fi
access points as well as for the integration of Wi-Fi and other
services into service provider network infrastructure. The company
was incorporated in 2002 and is headquartered in Sunnyvale,
Looking to the earnings history, we have a limited data set with
only two reports. Worse than having limited data is when they are
The most recent quarter was expected to show a gain of $0.03, but
was instead a break even quarter. That miss of $0.03 helped push
the stock lower by 22% in the session following the earnings
IPO Had Access Denied
Not too long ago, RKUS came public and had a major flop of an IPO.
The stock was offered at $15 and raised $126 million for the
company, but closed down 18% to $12.25 on its first day of trading.
Since then, the stock seemed to have a stronger signal for
The stock ran to highs of $26 and change before losing the signal
again with investors. Now back in the low teens, many are banking
on a strong second half for the telco and telco equipment providers
to boost shares back to all-time highs.
Earnings Estimates Adjusted
After its recent IPO analysts have had a chance to fine tune their
estimates. The 2013 Zacks Consensus has been trimmed from $0.16 to
a nickel. At the same time the 2014 Zacks Consensus Estimate has
dropped from $0.30 in January of this year to the current level of
Analysts often have trouble with a new company that does not have a
full year of data available to discern trends. This is likely the
case for RKUS, but the new, lower bar means the company has a much
better chance of beating the number.
The valuation picture for RKUS is a stiff one. This is often the
case for a stock that is fresh off an IPO with only two quarters
behind it. With minimal earnings at present the 45x trailing PE
doesn't seem to really be a fair comparison to the 12x industry
average. Similarly, a 304x forward PE seems to be more of a data
error than a basis for an investment decision. At the same time, a
250% growth in earnings from 2013 to 2014 works to level the absurd
The chart on this stock is one that doesn't scream a Zacks Rank #2
(Buy). Instead it looks like one of those stocks that got ahead of
itself and has later corrected. Taking advantage of the correction
is one thing that I suggest investors look into as the stock
bottomed in June and is on the rise. I am very positive on the
whole telco equipment space after companies like GOOG and MSFT
recently missed earnings. The likelihood of a flood of wearable
devices coming in 4Q is pretty high, and all of them will need
wireless connections... and playing a basket of wireless equipment
stocks makes a lot of sense right here.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
Breakout Growth Trader
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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RUCKUS WIRELESS (RKUS): Free Stock Analysis
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