Buy Cheap Tech Stock NeoPhotonics for Cloud, Telecom & Data Center Growth?
Zacks Investment Research | Jun 04, 2020 06:51AM ET
NeoPhotonics (NYSE:NPTN) NPTN shares have surged nearly 60% since the market’s March 23 lows. This helps NPTN outpace its telecommunications equipment market’s 40% jump. Plus this cheap tech stock, trading at roughly $9 a share, still has room to climb before it hits its highs.
NPTN in a Nutshell
NeoPhotonics designs and makes advanced hybrid photonic integrated circuit-based modules and subsystems utilized in high-speed communications networks across telecom and datacenters. This sounds very complex, and the process most assuredly is.
All potential investors really need to know is that NPTN helps support the fast transmission of data for cloud computing, data centers, and telecom networks. “The industry continues to move in our direction with higher and higher speed over distance requirements, which are satisfied by our ultra-narrow linewidth lasers, high baud rate coherent components and our Coherent (NASDAQ:COHR) pluggable DCO modules utilizing these leading optical components,” CEO Tim Jenks said in prepared Q1 remarks. “Needless to say, we are optimistic about our future.”
The San Jose, California-based firm topped our Q1 fiscal 2020 estimates in late April, with revenue up 23%. Meanwhile, its gross margin popped 11% to 30.5%. NeoPhotonics also easily topped our adjusted earnings estimate, with its +$0.17 EPS figure up from an adjusted loss of -$0.19 a share in the prior-year period.
Other Fundamentals
As we mentioned at the outset, NPTN stock is up roughly 60% since the market’s lows. The stock is also now in the green in 2020 and up 120% in the last 12 months. Despite this broader climb, NeoPhotonics closed regular trading Thursday at $8.99, which put it $1 off its 52-week highs and well below its 2016 highs of over $15 a share.
Accompanying its cheap price is a solid valuation picture. NPTN trades at 1.1X forward 12-month Zacks sales estimates, which is below its own recent highs and marks a discount against its industry’s 3.7X average. NeoPhotonics currently holds a “B” grade for Value and an “A” for Growth in our Styles Scores system. NPTN is also part of a highly ranked industry, and its balance sheet is pretty healthy.
Bottom Line
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NPTN’s earnings revision picture has turned far more positive since it reported at the end of April. The company’s adjusted fiscal 2020 earnings estimate is up 62%, with its FY21 consensus estimate 52% higher. This bottom-line positivity helps NeoPhotonics earn a Zacks Rank #1 (Strong Buy) right now.
Looking ahead, NeoPhotonics is projected to see its Q2 sales jump 20%, to help it climb from an adjusted loss of -$0.03 a share in the year-ago period to +$0.12. Overall, its fiscal revenue is projected to pop roughly 11.5% both this year and next, with its FY20 EPS figure expected to skyrocket from +0.01 to +$0.50 a share. NPTN’s bottom-line expansion is expected to carry over into 2021 as well.
NeoPhotonics might be worth taking a chance on because it’s not just the giants like Microsoft AAPL that are poised to reap the benefits of technological advancement both during and after the coronavirus.
These Stocks Are Poised to Soar Past the PandemicThe COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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