Update: Ceragon Chairman Buys Over 1.22 Million Shares For Just Over $1

| About: Ceragon Networks (CRNT)
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Summary

A December 10th filing with the SEC shows that the chairman purchased over 1.2 million shares at $1.05.

Trading for a mere fraction of a $4 analyst price target and with a market cap equivalent to less than a single quarter of revenues, upside looms.

This stock has been forming a solid base for the past few weeks, and it could be poised to trend higher as tax-loss selling pressure fades soon.

Ceragon Networks might have heightened takeover potential due to its low valuation.

A December 10th filing with the SEC shows that Zohar Zisapel, the chairman of Ceragon Networks (NASDAQ:CRNT), recently purchased over 1.22 million shares at an average price of $1.05. I wrote about Ceragon just about two weeks ago, when it was trading at $1.07, because I believed the stock was oversold and deeply undervalued. I gave five reasons as to why I planned to continue buying this beaten down stock, and this significant insider buy is just one more reason why investors should also consider Ceragon shares. Besides this major insider buy, there are a couple other factors that make this stock even more compelling now. This includes an optimistic recent outlook for the industry in 2015, and the fact that this stock has bottomed out and even started to trend higher. Tax-loss selling is about to fade, and without that selling pressure, this stock could gain momentum and head back towards a more reasonable valuation.

Another firm in this industry recently gave a bullish outlook going forward. This could be a positive indicator for Ceragon in the coming quarters as well. In a December 10th conference call, Aviat Networks (NASDAQ:AVNW) CEO was quoted in a Seeking Alpha post, which stated:

  • Aviat expects bookings to "improve and continue improving for the remainder of [FY15], driven by strength in the Americas, Asia-Pacific and Africa." Regarding Africa, he insisted Aviat is "confident regarding our position as a strategic partner to [major regional carrier] MTN," whose orders have come under pressure recently.

After an exaggerated pullback (which I explained in my last article), this stock has experienced tax-loss selling, but it now appears to be shaking this off. Ceragon shares are oversold and undervalued, and in the short term, could rally back to $1.50, which is the 50-day moving average. This becomes increasingly possible as the heavy tax-loss selling pressure fades very soon. A rebound could also be fueled by short covering, as it is becoming increasingly clear this stock has bottomed out. As the chart shows, this stock has been forming a solid base around the $1 level, and it has recently started to trend higher, which could be the sign it is ready to make a breakout move soon. There are not many trading days left in 2014, and the tax-loss selling pressure is likely to be fading significantly by December 19th, which is the last Friday before the holiday season sets in full swing. That means that many traders and investors will have completed tax-loss sales by that date. As I pointed out in my last article, this company generates nearly $100 million in revenues each quarter, and yet, the market cap is currently just about $75 million. That extremely low price-to-sales ratio indicates this stock is very undervalued. My last article also points out that a number of analysts and investors believe that Ceragon Networks could be an attractive takeover target. On October 30, analysts at Needham & Co. rated this stock a buy and set a price target of $4, which implies even more upside in the long term.

Here are some key points for Ceragon Networks, Ltd.

  • Current share price: $1.10
  • The 52-week range is 99 cents to $3.84
  • Annual dividend: None

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Disclosure: The author is long CRNT.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.