>>The full diluted shares after conversion are now 80 millions from current 37 million. That put RBAK market cap over $10,000,000,000 with today's close price at $135/share. With revenue only 40,000,000/year, it is going to take RBAK 250 years to produce 10 billion revenue. It better to grow its revenue 300% per year for the next 5 years to catch up this valuation. With large competitors as NT, CSCO, and small competitors like CMTN and MRVC all come with the similar products, we'll see the margin erode quickly. And it is almost impossible to keep this growth rate. If it drops to 50% growth rate for the next 5 years, then you will see the stock is going to visit $20/share in a year if RBAK does not comes out new trick.
You are right on your numbers but I disagree with your valuation analysis. Big market cap - true. 300%/year for next few years - RBAK could do it. Competitors - at this point in the market development, its not as important.
$20/share - I'm not even going to comment on that.
RBAK is a franchise in key internet infrastructure. The valuation is high but how do you accurately value non-linear growth (86% sequential) in a key growth market - broadband access? You can't with simple valuation metrics like p/e, psr. If technology stocks are in favor, RBAK will be a leader. If the market tanks, RBAK will go down with everything else. Otherwise, the trend is up and the stock is volatile.
In general, I want to be long internet infrastructure and trade around my positions. The lock-up release has created artificial pressure on the stock. Institutions will eat these shares up over the next few weeks and if the market holds, the stock will go back up to new highs. |
