I was hesitant to follow up with my previous article on Cobra Electronics (COBR) after a less-than-stellar earnings report for Q4 FY 2011. I was guilty of a little small-cap fever, imagining the potential great earnings report sending this electronics stock soaring. After high volume and hype of potential profitability, the stock jumped heading into last quarter's earnings. Investors were left sour, however, with a less-than-stellar report after a key buyer went bankrupt. This unforeseeable event affected Cobra's bottom line. The stock, bolstered by hopes, of course fell accordingly.
After a disappointing last quarter, hopes were not necessarily high going into today's earnings. Cobra's first-quarter earnings release was a nice surprise. The company saw its best first quarter since 2008 with an EPS of $0.05. Net sales increased over 17% in the first quarter. As of press time, the stock was nearing a 10% jump on heavy volume.
The net sales increase was a tale of two stories with the company's Cobra line and its Performance Product Limited line, acquired in early 2011. The Cobra line specializes in its bread-and-butter products such as CB radios and detection devices, and saw over a 23% increase in sales. The Performance Product Limited line offers higher-end and specific GPS products, and had a 9% decrease in sales.
Positive Trends For The Future
Cobra has been a pioneer in establishing travel-based technology for years. It's go-to products, such as CBs and radar detection, have maintained market stability for years. These products are now growing in sales. Case in point, its iRadar showed a large sales increase this quarter, indicating the market is again interested in radar detection devices provided by the world's foremost producer. With new laws requiring hands-free devices for professional drivers, phone product sales have increased and look to increase further in future quarters. CB radio sales increased in Europe as well as domestically.
On the flip side, the Performance Product Limited line's 9.7% decrease in sales may appear concerning. This reduction actually holds promise for the future, however. This higher-end line saw a decrease due mostly to slower sales of its Truckmate Navigation device, showing Cobra is still finding its niche in the GPS market. The discretionary nature of some products in this line shows it has room to grow as the economy picks back up. Already rebounding is this line's Snooper Shotsaver GPS golf product, which actually saw a sales increase despite a slower global economy. With economic recovery, this line would see a significant upside. Furthermore, this line's potential to penetrate improving European markets offers room for growth.
Consider Cobra For Long Or Near Term?
The near term may see some attractive volatility, but the data suggest long-term prospects could be profitable once again. New investors will likely see near-term gains with continued potential at its current price under $5. Those who have stuck with Cobra since its $15 days in the mid-2000s or, even more rare, those who have been with the company since its heyday in the early 1980s are hungry for continued growth. While the novelty of Cobra's technology is not likely to wow consumers as it did last millennium, it can continue to produce solid tools and is a name that's synonymous with quality automotive devices.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in COBR over the next 72 hours.