Talk about the tragedy of the individual investor. You expect a crash
and the stock goes up. When I read the quarterly report, that was my
belief also: the report was only so-so. But I went home and listened
to the conference call playback, and the mood was clearly different.
It was clear that Ascend had considerable growth in unit shipments,
market acceptance and margin (62-63%!). The new products are gaining rapid market acceptance, and there is little competition. Many new sales announcements on the way. They recognize revenues conservatively and do not flaunt their sales until they are completely wrapped up. Even though TNTs were shipped in Q4, they did not recognize any revenues for them in Q4. The company has zero debt. 50-55% of its sales are international, dollar-denominated. As you all know, the internet growth worldwide is only taking off. It is such a huge market, and Ascend has a big mindshare and marketshare.
Now compare it with CSCC. Although it is a smaller company, and therefore should be growing faster than Ascend to have similar PE.
But it is not: Ascend, which is twice as large, is growing
50-80% faster than CSCC, and Ascend's PE is lower than that of CSCC.
Now compare with Cisco which grew about 85% last year, and will probably do the same this year: its PE is 50+. Yet, ASND, which grew 250+% last year, and is slated to grow about 120-150% this year, has a PE of only 75+ (counting in Q4 results). Overvalued? Maybe not.
On the whole, it looks like Ascend has way to go on the upside: I think the PE is going to increase to about 85-90, and the company is going to grow at least 100%. Precluding other market events such as higher interest rates or a crash because of irrational exuberance in the DOW, I think this stock will double in price in 12 months.
Of course, there are lots of variables, and the winds may change for unknown reasons (that's why you should have a diversified portfolio),
but the future looks bright. |
