Why Ubiquiti Networks Inc. Shares Got Squashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications networking technologist Ubiquiti Networks  sank nearly 23% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has plunged in recent weeks on worries over slowing demand, and today's quarterly results, coupled with just in-line guidance, only reinforce those concerns. While Ubiquiti's fiscal 2014 third-quarter earnings per share of $0.50 edged out Wall Street by $0.02 and its top line grew 78%, a sharp 300% spike in inventory from January levels suggests that its near-term margins will be under heavy pressure.

Now what: Management now sees fourth-quarter EPS of $0.47 to $0.51 on revenue of $147 million to $153 million. "Ubiquiti is highly proficient at translating R&D into future revenue and we will continue to make investments that will grow and diversify our platform offerings," said founder and CEO Robert Pera in a press release. "We continue to quickly evolve and execute on our strategic plans and believe that we are building a dominant platform with a bright future." More important, with Ubiquiti shares now off more than 40% from their 52-week high and trading at a forward P/E in the mid-teens, there's plenty of juicy upside to buy into that bullishness. 

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The article Why Ubiquiti Networks Inc. Shares Got Squashed originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Ubiquiti Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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