SWIR – Initiation of Buy Recommendation

By: ispeculatornew
Date posted: 03.26.2007 (12:00 am) | Write a Comment  (0 Comments)

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SWIR – Sierra Wireless (Nasdaq) (Closing Price – $15.44) 

There aren’t many stocks in the market that I like right now but Sierra Wireless is one that I like a lot.

Sierra Wireless makes wireless laptop cards and the demand for their products is starting to pick up. A couple of quarters ago Sierra Wireless had earnings of 0.04 on revenues of 52.54 million. Last quarter they had earnings of 0.09 on revenues of 68.30 million. This quarter they have given earnings guidance of 0.12 per share on revenues of 82 million. As you can see Sierra’s financial numbers are increasing very nicely.

The improving financials should continue in the future. An analyst that covers SWIR stated the company is “well positioned” with a “growing product portfolio and customer base and should post strong results over the next several quarters.”

Today, a competitor of Sierra Wireless, NVTL, increased their guidance which reaffirms the market for wireless modems is strong.

Another thing to like about Sierra Wireless is they tend to beat the guidance the give, sometimes by a wide margin. In the corresponding quarter last year they had given guidance of (0.03) but actually posted earnings of 0.10. I think there is a good chance they will beat their guidance this quarter too.

The stock price of Sierra Wireless has been gaining momentum and if you look at the five year chart you will see that the stock price can run quite a bit. This is one reason I like SWIR better than NVTL.

From a trailing PE Sierra Wireless isn’t cheap but their numbers are improving so the forward PE should be a lot better. Also, I don’t think a PE valuation is as important as the momentum that is building for this stock.

I think Sierra Wireless is a good buy around the current price and I am going to initiate a buy recommendation at today’s closing price.

Disclosure: I currently own shares of SWIR.

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