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Summary

  • The company beat 2Q consensus on the top and bottom lines.
  • We still have a long-term bullish thesis on the company.
  • We anticipated the recent success of 2Q given its ability to continue launching new products.

Ubiquiti (NASDAQ:UBNT) posted 2Q earnings of $0.56 a share (topping $0.51 consensus) and revenues were $156 million (above $151 million consensus). Revenues were up 54% y/y, with EPS up 70% y/y. Shares are up close to 15% over the last month.

Shares are up just 3% since our June article. It's still 10% off our $50 price target. As we noted back in June, the key to Ubiquiti's business model includes:

Many rural areas still can't get Internet access. This isn't just an issue in rural parts of the U.S., but also in emerging markets. Yet, there is a solution. A select number of companies offer Internet access, but not via traditional DSL and cable.

Hence:

Ubiquiti's business model requires it to invest heavily in R&D, but it also has no direct sales force, relying on the quality of its product and user community to grow. The margins for this business are more than impressive. Its operating margin is a whopping 34%, compare that to Apple's (NASDAQ:AAPL) 28.6%. On a per employee basis, Ubiquiti is pulling in $2.8 million per employee, versus Apple's $2.2 million.

The company noted with 2Q earnings that it's focused on R&D. It launched a number of new products last quarter. Its margins also remain very robust, with gross margins of 44.2% for 2Q. And its operating margin is up to 34.23% for the trailing twelve months.

Source: Update: Ubiquiti Earnings

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