The next high-growth story: Terayon
I am speechless TERN compare to QCOM and RBAK!!!!?????????
where is SEC?
By Bambi Francisco, CBS MarketWatch
Last Update: 12:41 PM ET Feb 18, 2000
Internet Daily
Net Headlines
SAN FRANCISCO (CBSMW) -- It's hardly prime time for enhanced TV
and broadband. While we can take in audio and video over our PCs, we
have to suffer through poor quality.
Even so, for investors, the best time to place a bet on an industry is when
it's ready to take off.
Broadband communications company, Terayon Communications Systems
(TERN: news, msgs), is Larry Marcus's best idea.
Marcus is an analyst at Deutsche Banc Alex.
Brown and Terayon was his favorite small-cap pick
for all of last year -- even though his advice fell on
deaf ears.
He's so close to this stock, you could say he gave it some parental guidance,
having walked it down the IPO aisle back inn August of 1998. Back then it
was a difficult deal to get done because the company had negative gross
margins, little deployment and non-standard products.
He believed that Terayon had "strong technology and execution" but
investors were always mistaking it for a cable modem company, competing
primarily with Motorola (MOT: news, msgs) and Com21.
"Now, investors are waking up to the fact that Terayon isn't just a cable
modem story," he said.
"Terayon is the fastest growing equipment supplier to the cable companies,"
said Marcus.
The Santa Clara, Calif.-based company's existing clients are buying more
equipment and upgrading existing systems in their cable headends -- which
are similar to phone companies' central offices.
More importantly, while Terayon has had its greatest success in selling
data products to cable companies, including modems and products for the
cable headends, they're moving into video and voice. And they're also
targeting phone and wireless companies.
The company's core competency in combining data, video and voice is the
holy grail of broadband communications, he said.
Relatively reasonable?
Broadband infrastructure stocks, such as Redback Networks (RBAK:
news, msgs) and Copper Mountain (CMTN: news, msgs) are trading at an
average multiple of 30 times next year's sales.
Terayon, with a market
valuation of $6.1 billion
after a scorching run the
past few days, is
expected to generate
sales of $240 million this
year, and $325 million in
2001. That means the
company trades at
price-to-2001 sales
multiple of 19 times,
which is a considerable discount to where Redback Networks trades.
In the December quarter, Redback reported sales of $26 million, and
earnings of $2 million, or 4 cents a share. Terayon, on the other hand,
reported sales of $38.7 million, and earnings of $1.2 million, which worked
out to be 4 cents a share.
On an annualized revenue run-rate basis (that's when you take the latest
quarter multiplied by four) Redback, with a market valuation of $10.4 billion,
is trading at around 100 times revenue, vs. Terayon which is trading at 39
times.
So, it does look like there's a lot of room on the upside. And, if you believe
in George Gilder, who writes a technology newsletter, then Terayon is now
"poised to repeat Qualcomm's (QCOM: news, msgs) remarkable success."
I guess, that means Terayon is the next Qualcomm? We'll see. |
