Canaccord researchDragonWave* (DWI : TSX : $10.15), Net Change: -0.58, % Change: -5.41%, Volume: 1,383,735
DragonWave* (DRWI : NASDAQ : US$9.91), Net Change: -0.56, % Change: -5.35%, Volume: 2,437,438
How to train your dragon? Shares suffered another down-day, without any substantial news of which we’re aware. Could DragonWave be the target of aggressive and consistent short sellers? But if so, why? Are the short sellers aware of real facts that have yet been disseminated into the market? Peter Misek, Canaccord Adams Global Technology Strategist, doesn’t think so. He see no reason for the stock’s recent underperformance as he believes his investment thesis and fundamentals are intact. Based on his checks, he is not seeing any momentum slowdown for DragonWave.
While some think that Clearwire (CLWR) revenues have peaked, and are likely to decline, he thinks that, based on the carrier’s population coverage target of 120 million for 2010 and the fact that only one-quarter of planned base stations have their backhaul installed, revenues are likely to rise in Q4F10 and stay flat for the next few quarters, according to Misek. The stock’s weak performance could also be due to suggestions by industry sources that a competitor is taking market share of Clearwire revenues from DragonWave. Although Misek’s checks indicate this is true, it appears to be due to DragonWave’s continued inability to satisfy Clearwire’s aggressive deployment schedule despite. This capacity constraint may have forced the carrier to order equipment from a competitor in the near term.
Misek believes there is still substantial value in the shares of DragonWave. Excluding the $3.08 of cash on hand, shares of DragonWave are trading at about 7x this year’s earnings.