I would like some amplification on your statement that AVNX is selling at 12x next year's sales. This would imply sales of around $780,000,000.
Here is the math. $780 million is more like 7.22x next year's revenues. Avenex Market cap on Yahoo is $5.637 billion. $5.637 billion / 12 = $469,750 million. My pro forma revenue estimate is $455,970,000.
This is based on an analysis of comparable companies at similar portions of their growth cycle. The comparables I used were BRCM, BRCD, JNPR, SCMR, and RBAK. So far the model has had one quarter of real time testing. For this last quarter the model projected AVNX revenues of $33.653 million. Actual revenues were $34.767 million (+3%). Of course one quarter does not make an accurate model, but I have no reason to believe that AVNX will grow any slower than the average comparable company.
Under the model these are the expected revenue figures for March '01 and Jun '01 qs: $63,933, $99,147. These numbers will be subject to change as I receive more data from the comparables or add a few more comparables to the estimate. Nevertheless, if AVNX grows as fast as this group has on average, and as of now it has grown faster than the average, these will be the first 1/2 of 2001 revenue figures for AVNX. From this I extrapolate a 25% sequential growth rate for the succeeding two quarters.
You can call these estimates anything you will, but AMCC, as an example, is growing revenues in excess on 30% sequentially, while being supply constrained, and while having their largest customers sequential growth actually decrease, off of similar revenue numbers. AMCC's customer list is similar to AVNX's.
The result is approximately 12x next year revenues or $455.970,000.
As for consensus estimates, my experience with NGN companies has been that the consensus estimates continue to rise quarter after quarter. Redback for example is not projected to have $650 million in sales next year, up from $525 million about 2 months ago, and in the end this will probably prove conservative. Juniper and Sycamore continue to blow away estimates.
Avenex is in a market where it is not an expensive but actually an expense saver. Avenex allows a carrier to get more bandwidth out of its existing network and thus allow the carrier the luxury of not having to lay more expensive fiber. This hits the bottom line and is a no-brainer even for the stingiest carriers which may be run by an accountant. A capex slowdown by the carriers is not going to materially impact AVNX unless the carriers experience a need to reduce and cut back the bandwidth capabilities of their networks. If anything is clear the need for bandwidth is not decreasing.
Tinker |
