AlwaysLong683 wrote: CandyC wrote: I once owned a significant position but sold. The acquisition seemed good at first but the market dictates the price. The price before the acquisition was $3.90 before the split. So it's down 23% since in 11 months. In my opinion about a 20% downside risks outweigh upside due to chip shortages and upcoming higher interest rates. If the stock price was on a steady pace to be over $5 at today's date if they never aquired. I'm still watching the stock as it has potential great upside. Much better investment in oil imo. If Sangoma drops to $18 I might jump back in. Potential of $40 in 2 years if all goes well.
1) Since STC assembles and sells hardware to clients as well as software, they are affected by the chip shortage as they may have trouble acquiring the chips they need as well as having to pay more for the chips, which they may pass on to clients. However, I'd rather own shares in a company like STC that provides a "one stop, complete" UCaaS solution to clients as opposed to competitors' solutions which require multiple vendors given they don't offer all the hardware and software needed get a complete UCaaS system up and running. Plus, STC offers clients a choice of on-premesis, hybrid, or total cloud solutions depending on how comfortable clients are with the cloud, and can switch them from one to the other if / when the client desires. Thus, I think STC is undervalued vs. its competition and will eventually get the recognition it deserves.
2) The chip shortage will end - when, I can't say, but as one learns in a first year economics class, supply will eventually catch up with demand as there's money to be made. I believe the reason why there's a chip shortage in the first place is the chip makers cut production when COVID hit anticipating lower demand for chips as consumers cut back on spending. This didn't happen and demand is strong for chip-based products, so the manufacturers are playing catch-up. I suspect chipmakers such as Intel, Taiwan Semiconductor, Qualcomm, Broadcom, Micron, etc. could even expand operations to fire off more chips than they did in the past (if they aren't in the process of doing it already), as the need for chips doesn't look like it's going to slow down anytime soon.
3) The Star2Star acquisition was a brilliant move IMO. Not only was S2S a very successful company on its own, but they also boosted STC's ARR by a significant amount, and S2S's large-enterprise clients make the new, combined company capable of providing a full UCaaS system to clients of all sizes, in Canada, the USA, and internationally.
4) In most cases, when a company acquires another company, the market reacts negatively and the share price goes down in the short term as investors wonder whether the acquiring company paid too much for the takeout target, how smoothly the integration will go, etc., so I'm not concerned that STC's share price dropped post-acquisition.
However, as Andrey Omelchak (fund manger and long-time holder and follower of STC) put it in his Q3 2021 report:
"We are....very pleased with the management commentary on Star2Star integration. As of the end of September 2021, the integration is substantially complete. STC identified various cost savings, which are well above initial expectations, which will be put to work to generate a higher organic growth rate. They are also very confident in cross-sell opportunities, for what is now the broadest portfolio of products in the industry, between S2S and legacy Sangoma. It certainly looks like the management is conservative on its organic growth rate guidance for the next fiscal year."
5) The market price does not always reflect the value of a stock - especially when it comes to small cap stocks.
6) HIgher interest rates typically hurt companies that:
a) carry a high level of debt
and/or
b) offer a static dividend which represents the main reason why investors own shares in the company,
I don't see possible future higher interest rates affecting STC one way or another - it's the strength of the economy that will play a much larger role in the share price performance going forward IMO.
7) The NASDAQ listing was key, and I'm glad that has been accomplished. Now STC can compete on a level playing field with competitors also listed on major American exchanges. However, in my experience, most Canadian companies I have followed in the past that got their U.S.listing didn't shoot up in share price immediately as many in the US investment community don't even follow small cap Canadian tech companies not listed on a US exchange. Now that STC is on the NASDAQ, it should start appearing on US investors' radar and put on watch lists, and I suspect trading of STC will accelerate once these investors compare the value STC's share price offers vs. competitors like RingCentral and 8x8. My guess is the recent sell-off was due to tax-loss selling, so we may have reached bottom and get a nice bump in January. Hard to see the share price falling much further.
8) Oil E&P companies may still have room to run, but I suspect most of the good news may already be "baked into the cake" re. their current share prices, so not sure how much more upside they have. Also, these stocks are cyclical in nature and have taken a beating in recent years, so you need to be able to time the market both in and out to make good money, and I wouldn't want to try and predict how these stocks will perform going forward. Nonetheless, those who put a sizeable amount of money into them one year ago likely made a bundle in 2021.