SWIR Q2 08 Results

By: ispeculatornew
Date posted: 07.29.2008 (9:32 pm) | Write a Comment  (0 Comments)

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SWIR- Sierra Wireless (NASDAQ) – (Closing Price – $12.48)

Sierra Wireless reported second quarter results on July 23 and reported another good quarter. However, the company issued guidance below expectations and the stock price took quite a hit.

Sierra Wireless reported revenue of 156 million and diluted EPS of 0.35. Revenue and EPS both improved substantially year over year. For Q3 Sierra Wireless gave guidance for revenue of 140 million and diluted EPS of 0.27. This was below analysts’ expectations of revenue of 157.2 million and EPS of 0.37. Consequently, the stock price sold-off.

However, I think the sell-off was overdone and investors are currently pricing in a lot of weakness into the stock price. Sierra Wireless is almost trading at a single digit forward PE which is fairly absurd for a growing company.

I think the stock price has bottomed out or is very close to a bottom so I don’t see any reason to sell in the near term. There is concern about competition with Qualcomm and Ericsson in the PC embedded module market but it remains to be seen how this will play out. I think the market is already taking a negative stance on the competitive concerns and this is reflected in the stock price. If the competitive concerns prove to be less severe that thought I think the stock price will quickly rebound.

I also think the worst is behind us from a macro perspective and I believe the economy will start to pick up in the next few quarters. Therefore, I think the cautious spending due to the uncertain economic climate will start to dissipate.

I think it would be unwise to sell Sierra Wireless at the current price and I would continue to hold your shares.

Disclosure: I do not have a position in SWIR.

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