NUFO @ CSFB conf and revenue/valuation analysis:
fyi, nufo ceo and cfo will be presenting @ the csfb tech conf @ 2.30 phoenix time on thursday.
i went long nufo @ ~$31 11/16 (oops) and have tripled down here @ roughly $24 3/4. my rationale:
guidance for 2001 was recently raised to $150mm in revenues. this # does NOT take into account the recent acquisitions (confirmed in talk with ceo). Q3 rev INCLUDING acquisitions was 30mm (22.2mm without). annualized, this would be 120mm with NO growth. in Q3, seq rev growth was 54%. this growth was actually held up by slower growth legacy photonic tools biz. the telecom (optics) biz grew @ 76% seq. this much faster growing biz was 2/3 of rev in Q3 and will obviously become a greater % of total rev with each pasing quarter. granted, growth is off a small base and can't be sustained at these levels- but growth will be brisk for some time to come. JCA and globe are growing rev at comparable or greater rates currently.
for easy math, i'll just use nufo #'s NOT counting acquisitions (ie: not accounting for dilution of acquisitions or the revenue increase they will bring). ok...
imo, company will do >77mm in organic rev in 2000 (guidance is 73mm). imo, 2001 will eclipse guidance; and be at least $185mm. even 185mm would take a rather marked decline in seq growth (iow, i think 185mm is conservative as well). shares outstanding as of 30 sept were 58.14mm x current $24/share= $1.4b market cap. back out $500mm in cash due to a very timely secondary offering, and you have $900mm valuation on what i believe will be a minimum of $185mm in 2001 revenues= trading @ roughly 4.9x 2001 sales.
this is an exploding market that will continue for years to come. nufo is relatively well positioned now and could be very well positioned if the new passive components and their tuneable lasers gain traction next year. i have looked at this in every way i can and spoken to everyone who will talk to me and i can't find a reason NOT to take (and now increase) a position in the stock.
the bottom line (i hope) is that after the mo-mo crowd piled into optics, they endured too much pain from the collapse of b-c, then b-b etc etc,. this made it very easy to cast the same critical light on optics after the NT news. that said, nobody has bothered to look at what the light has revealed- they have just sold blindly. agreed, these stocks were way overvalued. now, many are undervalued.
there are other optics plays, but i have more confidence in nufo's ability to deliver over other companies which could hiccup which are also cheap (like bookham). nufo is growing off of a smaller base than jdsu and, as such, doesn't have the laws of big numbers to contend with. i like jdsu/sdli too; and may take a position there if they get any cheaper. further, >1/3 of nufo's market cap is cash. this should help provide a floor relatively close to here. of course, i thought the same @ $32. ehhh... stocks can always get cheaper than we ever imagine. that said, the risk-reward ratio @ $24 is compelling. i rarely put 7 1/2% of the portfolio in one stock. if we fall into the teens, i will increase further to go over 10%.
i now welcome ANYONE who has a legitimate contrary opinion to argue it- please. maybe i'm missing something here; but i doubt it.
all information contained herein is for informational purposes only and does not constitute a solicitation or an offer to sell advisory services. equities noted herein are referenced in the context of the message and are not necessarily representative of any portfolio. both myself personally, and clients of my firm, currently hold long positions in NUFO.
and, of course, all is clearly imo only........nick |
