NeoPhotonics Is A Contrarian And Risky Play Trading At 90% Of Future Tangible Book Value
- Losses in the next two years are expected at $0.86 per share, but real cash losses should be only $0.40 per share, roughly what the company has in unrestricted cash.
- Industry conditions remain very challenging and the company is not one of the strongest players.
- Thanks to debt covenants, NPTN’s financial situation could deteriorate further beyond the point of return if losses surprise to the downside in the upcoming quarters.
- As a result, the stock trades below future expected tangible book value and offers a ~20% upside, but there is a risk of further downside as well.