Westell Technologies Will Rally On In 2014
Long/Short Equity, Portfolio Strategy
Seeking Alpha Analyst Since 2012
Westell Technologies Inc. (NASDAQ: WSTL) has been on the upswing over the last twelve months. The company is up nearly 110 percent. The six month and three month periods also impressed with the company rallying 54 percent and 14 percent respectively. Westell Technologies delivered surprise revenue and earnings for the September quarter, and there is no ruling out the same thing happening for the December quarter as it remains muted on guidance.
Analyst's estimates have appeared way off mark recently, triggering a massive rally for the stock just after the company announced the results. Following the company's Q3 earnings release, share price jumped 40 percent before settling at around 20 percent later on in the day. Chances are if the company were to deliver another top line surprise result, then there is no ruling out another jump in the stock price. The question is whether the company can maintain this rally through 2014.
Westell Technologies designs, manufactures, and distributes telecommunications products to telephone companies and other telecommunications service providers in the U.S. and Canada. It operates in two segments, Westell and Customer Networking Solutions. The Westell segment is primarily charged with providing telecommunications companies with a range of outdoor and indoor equipment, such as cabinets, enclosures and mountings. The Customer Networking Solutions segment focuses on providing various services and applications that help companies manage and monitor their networks from anywhere. The company announced on December 12 that it will be launching Apple iOS and Android mobile applications for the Kentrox Optima Management System in January 2014.
The telecommunications industry is one of the promising markets for any technology company as more companies continue to embrace the changing trends in communication and business operations. The use of mobile devices is becoming the norm in nearly every organization and many now execute various tasks on the go. Therefore, Westell Technologies mobile operating systems applications will be useful for the company's growth going forward as it continues to adapt to the changing business environment.
"With the continued expansion of wireless networks and the requirement for a high quality user experience, companies must have the ability to continually monitor and control their networks anytime from anywhere," stated Andy Shah, Director of Advanced Development at Westell. "The Optima mobile applications simplify access to the critical site reports and real-time monitoring that are essential for improved network quality and availability. Our customers now have the power to comprehensively monitor, manage, and control their sites from nearly anywhere either via a mobile device or a desktop."
Westell Technologies has shown massive improvement in recent results and this has come without having to seek debt funding. Its balance sheet still reads zero debt and has a massive current ratio of about 6.8. Its trailing twelve month margins are still low, with a gross margin of 39 percent and operating loss and net loss margins of 57.6 percent and 8.9 percent respectively. However, based on recent results, these are set to improve in the next four quarters with earnings estimated to grow by 275 percent compared to last year's decline of 351 percent.
Despite facing competition from industry giants like Verizon Communications (NASDAQ: VZ) and AT&T (NYSE: T), Westell Technologies is set to rally on in 2014 and possibly beyond, as it continues its return to profitability. The company's fundamentals are improving overall, and the industry looks promising to support this campaign.
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