Disruptive Growth At A Discount


Ubiquiti Networks Inc (NASDAQ:UBNT) began under Robert Pera, a young admirer of Steve Jobs, who landed a job at Apple Inc (NASDAQ:AAPL) where he noticed that Apple’s WiFi devices could increase their transmission range over dozens of miles, gaining access to areas that phone and cable companies don’t reach. As his idea was ignored, he decided to build his own low-cost, high performance WiFi modules in 2005 using $30,000 of personal savings and credit card debt. Since the IPO in 2011, the disruptive low-cost and high performing technology has sold 60 million devices worldwide, through a network of over 100 distributors, to customers in more than 180 countries and territories (source: latest 10-Q).

The recent haircut in share price is a great opportunity to pick up shares of this growth stock at a very reasonable P/E of under 17 and a PEG ratio of 0.8. In this market it is challenging to find quality growth picks with a PEG ratio under 1.

While margins suffered in the latest quarter, falling almost 4% compared to the prior year, there is a long growth runway ahead for this disruptive player. This company is a long-term bet on the fact that people will continue to demand high-speed Internet. UBNT uses a low-cost technology to address a market and get more people up to speed.

source: latest 10-Q

Additionally, UBNT continues to boast an industry leading profit margin. This means the fall in share price was mostly overblown. Even if margin levels drop in the near term, Ubiquiti’s operates at a much lower cost compared to competitors. This will enable them to offer the best value to the customer with the highest performance offerings at a discount to competitors.



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