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Analyst Coverage: DragonWave, Inc. (NASDAQ: DRWI)
Summary:
DragonWave is a leading provider of high-capacity packet microwave solutions that drive next-generation IP networks. DragonWave’s carrier-grade point-to-point packet microwave systems transmit broadband voice, video and data, enabling service providers, government agencies, enterprises and other organizations to meet their increasing bandwidth requirements rapidly and affordably. The principal application of DragonWave’s products is wireless network backhaul. Additional solutions include leased line replacement, last mile fiber extension and enterprise networks. DragonWave’s award winning Horizon solutions are known in the industry for their leading capacity, reliability, and spectral efficiency.
DragonWave Inc. has a current market capitalization of $16.6 million with 3.0 million shares outstanding. Its average daily trading volume is 112,241 shares.
Financial Highlights (Q3 2016):
Revenue: 21.0 million
Gross Profit: 4.9 million
Net Income: -6.2 million
Cash and Cash Equivalents: 7.8 million
Total Debt: 26.7 million
Recent News and Analysis:
DragonWave announced a joint initiative with Mitel focusing on advancing the development of 5G networking. Mitel will contribute software and mobile network expertise while DragonWave will contribute outdoor networking expertise combined with small cell-focused and high-capacity, spectrally-efficient packet wireless backhaul solutions. Initially, the company’s plan to work on technology and research in support of compatible 5G solutions with the vision to expand into commercial products as the 5G market develops.
The company reported 3rd quarter of fiscal 2016 results in January and showed progress on getting expenses more in line with the current revenue run rate. Gross margin improved to 23.5% from 14.8% in the previous quarter and 16.3% in the same quarter a year ago. Operating expenses fell to $8.7 million from $10.5 million in the previous quarter and $12.2 million a year ago. The improvement was the result of restructuring efforts that began midway through the quarter and should show further improvement in the current quarter. These efforts could help the company get closer to cash flow breakeven this quarter.
The company introduced a new ultra-high capacity, multi-service microwave system that increases backhaul capacity twofold. This will help alleviate overtaxed backhaul networks which allows carriers to provide next generation cellular service to more customers.
Conclusions:
There are currently 2 analysts recommending Dragonwave. The mean estimated target price is currently $15.43. With the restructuring that began in the 3rd quarter lower the cost structure of the company, the company is poised to drop incremental revenues to the bottom line at a much higher rate in the future.
Sources:
- http://investor.dragonwaveinc.com/
- http://investor.dragonwaveinc.com/releasedetail.cfm?ReleaseID=950233
- http://investor.dragonwaveinc.com/releasedetail.cfm?ReleaseID=953010
- http://investor.dragonwaveinc.com/releasedetail.cfm?ReleaseID=962436
- http://seekingalpha.com/article/3810836-dragonwaves-drwi-ceo-peter-allen-q3-2016-results-earnings-call-transcript?part=single
- http://files.shareholder.com/downloads/ABEA-3DIC8B/1795838002x0x870109/4DC8548B-07CC-4C19-AE32-396440A5D4CC/Analyst_Slides_-_Q3_FY16.pdf
- http://investor.dragonwaveinc.com/releasedetail.cfm?ReleaseID=951466
- https://www.google.com/finance?q=drwi&ei=hNH_VqHUGMnyeJ71kZAN
- https://finance.yahoo.com/q/ao?s=DRWI+Analyst+Opinion
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