borrowed from RB (thanks vpersaud):
WaveRider's products give it
an edge
Stephen Miles
Financial Post
This week's big selloff in technology stocks has created a buying
opportunity for Internet wireless company WaveRider
Communications Inc.
The Toronto-based firm, which saw its stock (WAVC/NASDAQ)
trade up from about $1 (US) on the Nasdaq over-the-counter
market last October to a record high of $14 15/32 (US) last month,
was one of a host of speculative Internet plays that have been
caught up in all the market volatility.
The shares have lost more than 50% of their value in just a few
weeks and closed yesterday up 1/16 at $8 (US). The stock trades
in a 52-week range of $15 27/32 (US) and 3/4 (US).
However, the recent losses leave the stock with plenty of upside,
according to industry analysts, and it is a candidate to rebound
strongly in coming months.
WaveRider manufactures systems that provide high-speed,
low-cost Internet access for corporate networks, Internet service
providers and public telecommunications networks.
Major products include network communications links, which are
used to hook up wide area networks, and last-mile solution, which
enables Internet service providers and telecom firms to connect
residential and local area network customers.
WaveRider's products are particularly suited to countries that have
either expensive or underdeveloped telecommunications networks,
where an ability to bypass a local telephone carrier and connect
directly to an ISP can result in significant cost savings.
The company has signed significant deals in Latin America and the
Caribbean and has a distribution agreement in China -- one of the
fastest growing markets for Internet access.
WaveRider has more than $15-million in back orders for its
last-mile product and recently signed a distribution contract with
Mexican firm VoIP International S.A. that will bring in more than
$28-million in revenue in two years.
It rolled out its latest product line -- the LMS2000 -- at an
International Wireless Communications Expo in Las Vegas last
month.
The global wireless Internet access market should reach more than
$2-billion (US) by 2001, according to market research firm Yankee
Group. The number of customers linked to the Internet by wireless
is expected to explode from just three million this year to more than
50 million by 2004.
WaveRider is strategically positioned to capture between 5% and
10% of this market, say Chris Bonnet and Clarence Rebeiro,
analysts at Groome Capital Corp.
The pair, who began covering WaveRider in October when its
stock was at 97½ (US), issued a "speculative buy" rating when it hit
$1.56 (US) in December. In a February research report, they noted
that WaveRider's strength in deploying high-speed wireless Internet
places it in a leading position against global competitors.
"WaveRider's innovative wireless products can allow a service
provider to offer broadband Internet access to subscribers at
savings of up to 75%, compared with wireline alternatives," the
analysts wrote. "Given the advantages that its products have over
available alternatives, we believe WaveRider is well positioned to
benefit from expected explosive growth of the Internet."
They expect WaveRider's revenue to climb to more than
$620-million by 2004 from $20-million in 2000.
"We believe that demand for WaveRider's products could lead to a
[compound annual growth rate] in sales of over 200% between
2000 and 2005," they say.
The company is expected to turn a profit for the first time next year.
It had sales of $1.7-million in 1999, up almost 300% from
$255,000 in 1998.
Mr. Bonnet and Mr. Rebeiro have a 12-month target price of $13
(US) on WaveRider shares -- a 62.5% rise from yesterday's close.
"We would consider changing our target price based only on a
change in WaveRider's fundamentals," they say.
Their price target is based on 65 times WaveRider's estimated
earnings of 20½ a share in 2001 -- a somewhat conservative
number considering that some of its rivals already have been
accorded price-to-earnings multiples of as much as 130 times
earnings.
"We chose a lower P/E [for WaveRider] because we feel that
triple-digit multiples are unsustainable in normal market conditions,"
the analysts say.
Despite the high-tech carnage this week, Sunnyvale, Calif.-based
wireless competitor Proxim Inc. still has a P/E of 120. Its stock
(PROX/NASDAQ) has gained almost $20 to about $120 (US) in
the past two days.
Mr. Bonnet and Mr. Rebeiro say that if current market conditions
hold, then growth-oriented investors may pay as much as $26 (US)
for WaveRider shares within the next year, which would bring its
valuation more into line with Proxim.
WAVERIDER COMMUNICATIONS INC.:
CEO: Bruce Sinclair
Ticker: WAVC
Listed: Nasdaq Bulletin Board
Head office: 255 Consumers Road, Suite 500, Toronto, Ontario
Telephone: (416) 502-3200
The link is nationalpost.com and check under INVESTING then HOT STOCK |
