SONS sell off- there is always a reason, we just don’t know it
Harvey Sax
Sonus Networks SONS sold of 11% yesterday on a rather benign earnings report. We have a large position in it and were very frustrated by the pin action considering the massive insider buying. The CEO has bought over $6 million worth of the stock at these prices or higher in the last 12 months. The behavior also puzzled some analysts as reported by the Fly on the Wall.
Sonus weakness a buying opportunity, says B. Riley
B. Riley said Buy rated Sonus reported an in-line Q4 report and outlook and expects revenue growth to resume going forward. The firm raised 2015 estimates while lowered the price target to $25.50 from $26.50 and recommends buying on yesterday’s weakness. :theflyonthewall.com
After Sonus reported Q4 sales in-line with its recently reduced guidance but reiterated its Q1 and 2015 guidance, Wells Fargo believes that the company’s growth and profitability is likely to improve through 2015. Consequently, the firm thinks the sell-off following the company’s results is likely to prove to be an attractive entry point, It keeps an Outperform rating on the shares. :theflyonthewall.com
Jefferies says yesterday’s sell-off in shares of Sonus is “inexplicable” and “at odds” with the reported Q4 results. The firm calls Sonus’s Q4 gross margin “very strong” and notes its Q1 and 2015 guidance were in line with consensus. Jefferies sees a compelling entry point at current levels and keeps a Buy rating on Sonus with a $25 price target.
There is always a reason for a sell off. I just don’t know it. I expect we will see some insider buying shortly. I for one don’t see the valuation so I’m not as enthusiastic now that the technicals are not working as expected. On the valuation if they weren’t paying themselves so much executive comp, they could be worth it, maybe worth something to another company that could shed salaries and public company expense. SONS has no debt, positive cash flow, and to listen to them they say they are in a hot growth market for video over LTE which makes sense so they could be an acqusition candidate and are or have been in talks with Cisco, and the like. That would explain the massive insider buying buy the CEO because the fundamentals do not.
