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Sandeep Grover is a technology investor and works as a senior product manager at
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  • SHOR - A Long Term Opportunity

    In the last week’s sharp selloff, Shoretel (NASDAQ:SHOR), a leading SMB IP telephony provider has declined almost 8%. I think this is a great buying opportunity for both short-term as well as long-term investors. As can be seen in the chart below, the stock’s downtrend ended in November and since then, the stock has been on an upswing. If the stock further goes down to under $5.5 levels, it should be seen as a stronger buying opportunity in my opinion.
    SHOR long

    Although SHOR competes with giants such as Cisco, Avaya, Nortel and Mitel, it’s a long term play for various reasons:

    -          Superior distributed architecture:  To do research on SHOR, I visited various VOIP forums, where IT administrators discuss their PBX issues. I didn’t come across a single forum, where IT admins were pissed off with SHOR, whereas there were complaints about other competitors. Every single forum agreed on the superiority of SHOR solution over other established firms. Finally, the firm has been gaining market share consistently and is already the #1 SMB IP provider.

    -          Extremely strong balance sheet: Cash per share of $2.5 and no long-term debt.

    -          Nortel bankruptcy: The industry recently saw the bankruptcy filed by Nortel Networks. SHOR stands to gain from this development as it’s a great opportunity to attract Nortel’s re-sellers and customers.

    -          Stock Ownership: As per the proxy filed in October 2009, the insiders own around 8.4% of the stock and roughly 53.5% of the stock is owned by VC firms including Crosspoint and Foundation. Although, VC ownership can cause some trouble but I don’t see that happening till the stock price is less than the IPO price of $9.5.

    -          Cheap Valuation: With EV/Rev ratio of 1.0x, the stock is extremely cheap compared to its peers.

    The company is scheduled to announce its Q2 results this week on Wednesday, and while the short-term response is hard to predict (as can be seen with other technology names such as INTC, GOOG, SKWS all of which have been sold despite solid quarter results), I remain bullish on the long term prospects of SHOR.

    Disclosure: Long SHOR
    Tags: SHOR, CSCO
    Jan 25 12:23 AM | Link | Comment!
  • CTCT: Buy on current weakness
    Constant Contact (NASDAQ:CTCT), a leading on-demand email marketing company has declined almost 32% from its July 30th high of $22.70. The stock is currently trading at 2.8x EV/Rev, a big discount to its peer SaaS companies avg of 5.2x (Please see the comps analysis below).
    CTCT chart
    Nothing major has happened since July 30th for CTCT – The Company has beaten estimates, has issued a decent guidance for the current quarter and has been growing much faster than other SaaS companies. The only significant event that has happened is the CFO transition that CTCT announced on Dec 1st. Looking at the above chart and comparables below, it seems like the stock is mainly being driven down by technicals and is perhaps a solid buy on this weakness.

    CTCT Comps

      An impressive growth rate, a retention rate of more than 97% on a customer base of more than 300,000 and a cheap valuation suggests a strong buy.


    Disclosure: No position

    Disclosure: No Positions
    Dec 28 2:00 AM | Link | 1 Comment
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