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The 5G Theory: Why Ceragon Makes For An Excellent Takeover Target

Mar. 01, 2018 2:27 PM ETCeragon Networks Ltd. (CRNT)145 Comments
Jason Phillips profile picture
Jason Phillips


  • This idea was forwarded to me by a contact who used to help with our fund.
  • Over the next several years, Ceragon Networks will have two independent drivers of growth behind it, acting as a tailwind to its share price.
  • In addition to the prospects of above-average growth staring directly ahead, Ceragon shares trade at a discounted valuation to the broader averages, even after accounting for a sizable discount.
  • After conducting my own research and due diligence on the company, I have become somewhat convinced that Ceragon could make for a very logical takeover target by a larger competitor.

This idea was discussed in more depth with members of my private investing community, Valuation 360.

Ceragon Networks Provides an Essential Need for the Wireless Industry

Ceragon (NASDAQ:CRNT) is a leading "wireless backhaul" specialist in the communications equipment market.

The company is a market leader in wireless backhaul - both in terms of its technological capabilities and as well its leading market share amongst its peer group in the "best of breed" segment.

Speaking straightforwardly, "wireless backhaul" technologies are used to increase wireless network coverage and implement wireless network densification for telecoms.

The vast majority of Ceragon's customers are Tier 1 and 2 telecoms, but the company also does a small bit of business with oil and gas companies and utilities.

This article will focus exclusively on the telecom side of Ceragon's operations as this is the part of the business which drives growth and profitability for the company.

In a period where wireless users are increasingly demanding more from their networks and service providers, Ceragon offers solutions designed to improve the infrastructure of wireless networks in order to deliver more robust voice, data and other multimedia services to their wireless customers.

Rapid subscriber growth and the proliferation of advanced smartphones, tablets and other high data consuming devices have significantly increased the amount of traffic that must be carried over a cellular operator's backhaul infrastructure. As a result, existing transport capacity is heavily strained, creating a bottleneck that hinders service delivery and quality.

Source: Ceragon's 2016 Annual Report

In emerging markets, the issue telecoms face is one of adding coverage in remote areas but also one of addressing capacity constraints in densely populated urban areas, as thousands of new users are added each day, using increasingly more data-driven services - putting more demands on operator's networks.

In developed markets

This article was written by

Jason Phillips profile picture
Individual Investor with a focus on publicly traded equities and specializing in subjects related to public company valuation. Awarded CFA Charter by CFA Institute in March 2016.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CRNT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (145)

Long time no talks on CRNT fellows
Stock price over $4, good call Jason!
Hi, Jason : Do you have any update views after CRNT ‘s Q1 result?
Idea to $2.10 would be nice.
We must expect results of the order of 80 to 81 Million and 0.04 profit
Some bad news last night that sprint /T-Mobile merger expected next week which is a complete turn of events for the worse near term.

It looks like the ya order from both may stall to ship as they close this deal and coordinate installs as a joint company and some of the strength last quarter in bookings may be mitigated.

I expect pressure on the stock and this to keep a lid on upside until we hear more.
xeeeu3 profile picture
No pressure so far. I am expecting revenue higher than 80 mil this qtr. We will see what happens.
binartech profile picture
90 MMs is my number, 7 cents .....
I took a big position at $2.56. I am betting this will rip higher from here.
Shabby ! 2 months without news to annonce a small contract.
It will be hard in the future for Ceragon.
The market reacts badly to this new information.
binartech profile picture
The problem is that Management is not doing enough to get coverage from market analysts but the company has merits. There are several of this projects going on, one more in spain, they are diversifying which is very good.

Add tailwinds: Interest on the rise, the company has zero debt, this market will turn into stock pick and not buying the dividend yielding companies as this investors will move to bonds.
Also the shekel is getting devalued against the dollar.
I'm very optimistic on next CC and on......
add UK to that as well.
Yeah, they have not provided any update on bookings growth, which I also find a bit strange. I suspect that since most of their larger bookings are done through partners, that they have to delay in announcements until their partners make the deals public.

As far as future bookings growth goes, would be nice to see closer to 95 to 100 million this quarter. That would effectively put CRNT in the 4.50 to 5 + a share, possibly driving it to 6 bucks, as long as there is no margin contraction, I would expect to CRNT to do quite well after these earnings.
RIP delisted. That is why NOK won the business
binartech profile picture
New project in Rural Spain.
CRANT wants to get a Buyout offer. They are negotiating
The big problem of Ceragon : no communication and poor results
Charts point to $2.33.
NOK will crush CRNT. Both price and performance.
Behind more NOK Before you goes over six dollars
Agreed. Nokia likely to take out crnt. Avoid no and accumulate crnt.
Continue to add to Nokia. I believe CRNT disappoint and I think it’s the worst $2.30. If that happens, that would be a great time to buy some holding to three years
Good thought. I could see nok going to $2.3 but unlikely. Keep buying crnt and holding for 3 decades is prudent.
Agreed. Once Nokia buys crnt then nok will be the company to own.
Ironwill71 profile picture
Hi Jason, given the recent developments with Nokia winning the CHL contract with China a couple days ago to build out their 5G network country-wide, and despite being competitors in the past... Nokia and CRNT have worked together... what are your thoughts on how this affects and could benefit CRNT?
It’s a rather shocking development as Huawei would have been expected to win this business and Nokia took it. Given the competition separation has intensified I would only expect Crnt to benefit in a situation where Nokia is capacity constrained as Nokia can provide everything crnt can.

In that regard it is a positive for Crnt just because the possibility exists whereas it wouldn’t if Huawei were the lead
I am out. Bagholders will be crushed
haha! Again! So what we learned today?
Ceragon is not the Eldorado that all believed
I love how this thread is so quiet, volume and price are slowly falling. It shows little interest in Crnt right when the quarter has ended. In the meantime towers, antennas and smalls cells are popping up everywhere in anticipation of 5g. They always say quiet before the storm....

I am backing up the truck to reload all I have sold tomorrow anticipating a market fall in the AM given the trump dump
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