It's been a little quiet here on the RBAK forum so I'll see if I can inject a little life into it.
Long Redback? You Better Believe It!:
RBAK has been down on virtually NO NEWs in the past 10 trading sessions or so. Actually, there have been a few press releases by Redback, indicating new customers, etc. The usual.
My take on the recent downturn?
1) General market malaise. And tech stocks (particularly internet stocks) are out of favor. Valuation questions are at the forefront these days.
2) Low volume of trading on the general market. This simply indicates that the direction of the stock market is not conclusive. RBAK's stock volume is above its one-year average of around 2,000,000 shares a day. It traded 4+ million today. Four million is about average for RBAK in the past 3 months.
3) Institutional Selling? Some posters have indicated that large blocks of RBAK have been sold. The Soros fund was purported to be selling during its collapse. Based on my observations of RBAK over the past 5 days, I feel strongly that at least one large institutional investor is getting out of the stock as RBAK has had great difficulty making headway northwards. As soon as it starts to move, Bammm!, it gets knocked down on increased selling pressure. Someone's dumping their shares.
4) CSCO purchase of Arrowpoint. Some investors may have mis-perceived that the Arrowpoint purchase by CSCO may lead to increased competition. However, the switches that Arrowpoint makes do not directly compete with Redback's SMS hardware.
5) CSCO weakness.
Positives:
Redback's recent quarterly earnings report was terrific. Lots of new customers, even some key ones internationally (France Telecomm), great revenues, strong revenue growth, and a profit (if you take out one-time expenditures) for a 2nd consecutive quarter. Redback has turned the corner on profitibility and this has not been generally recognized or acknowledged by the marketplace.
Redback occupies a critical niche in broadband and is 1 year to 18 months ahead of their competition. The announcement of the SMS 10000 took the air out of the sails from some of their would-be competition.
Competition? Nobody makes a product like SMS at this time. CSCO and Nortel have products that do some of the things that Redback's SMS product line does, but their products are nowhere near as comprehensive as Redback's, which integrates with multiple customer feeds (DSL or cable or wireless and multiple backbones, allowing the Service Provider to manage a spiraling customer base with multiple service options. SMS also integrates with the Service Provider's accounting system.
Merger with Siara: Already digested and moving forward! The SmartEdge products that have been announced are critical to Redback's future so we all need to keep our eye on this. Make no mistake, however, this is a niche that we want Redback to fill. An Optical/broadband/SMS type product will be in great demand. Redback's first generation products in this area are of critical importance and we should be seeing them later this year (or early next).
Short-term & Long-term Outlook: Once the sellers are exhausted in this bear we're in, the stock should move up 20-30%. Everybody is just a bit too negative on the internets (and the networkers) these days. Guess what? They'll be back in favor again before the year is out and boy will the fickles have to pay to get back in! Ha - the laugh's on them! Longer term, Redback needs to continue to execute and grow their product line and customer base. They're certainly doing this now so all the company needs to do is KEEP DOING WHAT THEY'RE DOING. The July earnings announcement should be very revealing.
One analyst from Kaufman Bros. puts RBAK valuation at $250. This is possible if DSL & cable growth continues at a strong pace. As the internet grows, so will RBAK.
So - be bold and stay the course!
Good luck to all, |
