5/9/2014
By Charles Payne

Yes, tech stocks were ahead of themselves, and yes profits matter, which is why some of the names destroyed in the past couple of weeks are unfair but also creating amazing opportunities.  Here are two.

Ubiquiti Networks, Inc. (UBNT)

The company posted financial results that beat the street and offered guidance above consensus. Still, the initial reaction was to crush the stock in the aftermarket. Par for the course but 100% inappropriate.

• Revenue +78%
• EPS +100%

While management raved about R&D spending, it was a little lighter than I would have preferred, but that's my only problem with the earnings report. The only other issue, and it's not fundamental, but makes the stock a target, is the massive insider selling - nine transactions for 7.6 million.

Global Sales

• NA $29.2 million +38.6%
• SA $25.1 million +35.5%
• EMEA $77.9 million +146.3%
• APAC $16.2 million +35.2%

I was impressed with operating margins which leaped to 33.8% from 24.9%. This company has a fantastic pipeline of products and guidance for the current quarter is above the street. The stock isn't some wildly overvalued high flyer as shares currently changing hands at a PEG ratio of 0.80.

This stock is a buy-hold even with near term tech meltdown.

Stratasys Ltd (SSYS)

I know its all about sell first and never ask questions later with tech, but the reaction in SSYS is ridiculous, and overdone big time. This stock is a buy, but we aren't advocating forcing it because lunacy has no boundaries, so we can't use charts or valuation metrics to determine a bottom.

That said, this is a $100 stock easily in the future and the earnings report underscores that notion. This is a company that's posting earnings and building for future dominance in a space that will revolutionize manufacturing. This isn't a "top line play," it’s the real deal.  Gross margins expanded to a record 60.9 from 59 as higher margin products have gained more traction. Management is investing big into cap ex and making more acquisitions that should bolster its position in the space.  Guidance is above consensus on the top and bottom lines.

At the very least, the stock is a Hold, but one day in the future this price will look dirt cheap, but that doesn't mean it can't get cheaper first.
 

Charles Payne
Wall Street Strategies

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