Please ensure Javascript is enabled for purposes of website accessibility

Why Ubiquiti Stock Rose 13.8% in May

By Billy Duberstein – Jun 3, 2020 at 10:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The networking equipment vendor delivered a better-than-expected earnings report and took advantage of the March sell-off to buy back stock.

What happened

Shares of Ubiquiti (UI -0.19%) rose 13.8% during the month of May, according to data from S&P Global Market Intelligence. The networking equipment vendor delivered a better-than-expected earnings report on May 8, and also bought back a fair amount of stock during the first-quarter market plunge.

It was another example of great business execution combined with shareholder-friendly capital allocation that Ubiquiti has been known for over the past few years.

Ubiquiti's cameras and switches linked to  laptops in an office Wi-Fi setup.

Image source: Ubiquiti Inc.

So what

During the first quarter, Ubiquiti's revenue grew 18.4% and earnings per share rose an even better 28% year over year -- both figures handily beating analyst expectations. The growth was powered by the enterprise segment, which leapt 31.6% year over year, while gross margins also expanded.

The results reflect a business seemingly immune to the coronavirus. Ubiquiti has significant manufacturing operations in East Asia and China and sells equipment on a global basis, so it wasn't only the last two weeks of the quarter that were affected. It's possible more customers sought to grab Ubiquiti's latest networking equipment in order to stay connected during quarantine. We don't know for sure, as Ubiquiti doesn't host conference calls anymore.

What we do know is that Ubiquiti took advantage of the March plunge, buying back 1.1 million shares during Q1 at an average price of $133.38, well below today's price hovering around $180.

Now what

Ubiquiti remains a great but obscure company, as CEO Robert Pera now owns nearly 90% of the stock but doesn't hold public conference calls. However, the company continues to innovate in a low-key fashion, recently releasing a new payment gateway product for its service provider customers. Payments processing can be a very profitable business, so if this product has legs, it could lead to even more profitable growth in Ubiquiti's future. The stock remains a personal technology favorite.

Billy Duberstein owns shares of Ubiquiti Inc. and has the following options: short June 2020 $250 calls on Ubiquiti Inc., short June 2020 $80 puts on Ubiquiti Inc., and short June 2020 $130 puts on Ubiquiti Inc. His clients may own shares  of the companies mentioned. The Motley Fool owns shares of and recommends Ubiquiti Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ubiquiti Networks, Inc. Stock Quote
Ubiquiti Networks, Inc.
UI
$293.56 (-0.19%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.