Ubiquiti Networks, Inc. (NASDAQ:UBNT)

TSIF (99.96) Submitted: 8/10/2012 12:46:53 PM : Start Price: $8.54 UBNT Score: +109.57

Even at half it's IPO price last October and at 25% of it's peak ($35.99) May 1st, this falling knife with a pointy antenna tip may still bite. I would have felt "safer" on my mid-day first day plunge at $6.50 where Ubiquiti Network dropped briefly yesterday evening in aftermarket. There is worse news than copycats copying your technology and dumping it on the market, but I can see why that would make investors nervous. Ubiuiti Networks indicated that it was "on top" of the problem and should have it resolved in the next two more quarters. That sounds hard to do, especially since it appears to be former distributors dumping into "existing" sales channels, but overall they are still making money during ligitimate sells. Despite the counterfeits Ubiquiti Networks posted rising sells this past quarter, but does not expect the trend to continue until the copy issue is resolved.

Ubiquiti Network plans a $100 Million stock buyback to help counter the impact to the share price plunge, but if it does so, it will be buying with mostly borrowed money on it's revolver. Not necessarily a good practice, but it could work if they maintain profitability during the "crisis".

At a minimum, the sub $9 share price should stop insider investors from "dumping" large blocks as they have since the IPO quiet period expired. Normally I would not have been "interested" in Ubiquiti Networks at >$15 due to this issue, despite growth metrics.

Spec play, falling knife. With other analysts I think this will take several quarters to clear, but copycats do help show the value of Ubiquiti Networks products. Will monitor quarter to quarter. A net quarter loss would cause even a larger drop.