Why Ubiquiti Networks, Inc. Climbed This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Ubiquiti Networks, Inc. (NASDAQ: UBNT  ) gained about 2% this morning after Wells Fargo initiated coverage on the networking products company with an outperform rating.

So what: Along with the outperform rating, Wells planted a valuation range on the stock of $47 to $51, representing about 30% worth of upside to yesterday's close. While value investors might be turned off by the stock's sharp rise in 2013, Wells believes there's plenty of room to run given Ubiquiti's differentiated position in the still-rapidly growing space.

Now what: Wells expects Ubiquiti to post top and bottom line growth of more than 20% over the next few years. "Our positive view reflects our belief that Ubiquiti's disruptively priced fixed mobile broadband solutions are likely to see strong growth as users in underserved and underpenetrated markets increasingly demand Internet access," noted Wells. "Several new products appear disruptive and may also present attractive opportunities." With Ubiquiti up more than 200% in 2013 and trading at a 30-plus P/E, however, I'd wait for a wider margin of safety before betting on it. 

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