Newsletter Watch: Two techs
Two leading advisors have recently issued buy recommendations on small cap, high growth tech firms - one in the communications sector and one in data protection.
Leo Fasciocco is a technical analyst who focuses exclusively on isolating stocks that are breakout candidates. For long positions, he seeks stocks that are breaking above long-term resistance. Likewise, for short candidates, Fasciocco looks for stocks that are breaking below support levels.
In his Ticker Tape Digest newsletter, Fasciocco’s latest upside buy is Ceragon Networks (Nasdaq: CRNT). The company, based in Tel Aviv, provides wireless solutions for cellular and fixed wireless operators. The company has annual revenues of $74 million and a market capitalization of $190 million.
Fasciocco explains that the company's systems are used by communications service providers to offer high-speed wireless Internet access to subscribers. CRNT sells its products directly, and through alliances with other equipment makers.
Technically, Fasciocco says, "CRNT is breaking out powerfully from a 16-week, cup-and-handle base and making a 52-week high. The move was triggered by a strong earnings report, accompanied by a jump in volume equal to 16 times its normal activity. Impressive!"
He notes that the company came in with net for the first quarter of 11 cents a share, up sharply from 4 cents a share a year earlier. The 11 cents, he observes, topped the consensus estimate of 7 cents a share, and the highest estimate of 8 cents a share.
"The big upside earnings surprise was taken in a very bullish way,” says Fasciocco. Meanwhile, revenues for the quarter "surged" 59% to $34 million, from $21.3 million a year ago. He notes, "The company benefited from strong demand from emerging economies. It said bookings were very strong."
In Fasciocco’s view, strong profit growth should continue. "For the upcoming second quarter, analysts expect net to jump 144% to 7 cents a share from 3 cents a year ago. The highest estimate on the Street is at 8 cents. Net for the year should leap 60% to 30 cents a share from 19 cents a year ago. The stock sells with a price-earnings ratio of just 23."
Overall, Fasciocco considers the stock a low-priced speculative play, but one that is "extremely strong" and attractive for both value and growth investors. He looks for a move to $9 per share - a 20% gain from the current price of $7.46 - within the next few months.
Jim Oberweis, Jr., a small-cap growth stock money manager and editor of The Oberweis Report, also looks to the technology sector with his latest idea: data protection firm Double-Take Software (Nasdaq: DBTK).
Double-Take, with a market cap just below $300 million, develops and supports software that allows customers to protect and recover business critical data and applications.
Oberweis explains, "Their software solutions reduce the high cost of downtime by continuously replicating information, enabling failover to the server where the information was saved."
He notes that this specific segment of the data recovery market is projected to grow at a 25% compound annual growth rate through 2010. He also points to the firm's customers, which he notes include over half of the Fortune 500 companies - including Microsoft, Dell and Hewlett-Packard.
The stock has a short history as a public company; its initial public offering was in December 2006 at $11 per share. Oberweis adds, "In the company's latest reported fourth quarter, sales increased approximately 61% to $19.1 million from $11.8 million in the fourth quarter of last year."
He continues, "Double-Take reported earnings per share of $0.07 in the latest reported fourth quarter versus a loss in the same quarter of last year."
As a money manager, Oberweis holds positions in the stock that he recommends, and notes that clients of Oberweis Asset Management own 351,000 shares of Double-Take. Overall, he considers the stock appropriate only for risk oriented investors.
Steven Halpern is the founder of “TheStockAdvisors.com - Steven Halpern's Guide to Financial Newsletters,” the first website to feature a daily overview of the investment newsletter world.
