Ceragon Networks Ltd. (NASDAQ:CRNT)

love it

Wireless "backhauling" is something that I predict huge growth in over the next few years. With the emergence of the iPhone and its groundbreaking wireless internet I see no reason why every other wireless provider wouldn't integrate this into their phones, especially if they want to keep up with the competition. Ceragon is one of the most advanced and well-run wireless backhauling companies. At this price Ceragon is a steal, stop sitting around and BUY this company, you'll be doing yourself a favor

Iphone! need for faster download speeds through cellular is a must.

Growth Stock

Gotta love the niche player

Everyone loves their cell phones

World cell industry in bull market

Sweet deal.

Explosive growth, no debt, 24 million cash, 35% margins, merger candidate, leading technology in it's field, what is not to like about CRNT? It is a 200 million cap company from Israeli. Could be trouble behond CRNT control. Great HG but be watchful and diversify.

This is a Global cell phone provider in emgering markets.

I think if you dont get thisd soon it will be too late. Its only going up for years to come.

HG go

Small company well-positioned for phenomenal growth in the new WIFI world with point to point networking technology. No more need for wired networks--very cool.

huge cell phone growth in asia, and these guys are best suited to handle the growth. zero debt, market growth. good stock if you can get in low enough.

a tad worried that it may be overpriced at the moment (june 5 '07)

No body wants to be cut off and in isolation. Growth--intellectual and material--cannot take place if you cannot communicate with others or be reached by others. Yet if, like so many billions of people today, who live in undeveloped countries where there is no techno infrastructure--no cables, no phone lines, no fiber optics--what is one to do? Here Ceragon steps in. With their technology it is no longer necessary to spend the time and money to install the older style infrastructure. Instead, it can be accomplished with their 'backhaul boosters."

Here's a description of the company and what it does from a recent 5/15/07 article:

"Ceragon Networks Ltd. is a leading provider of high-capacity wireless backhaul solutions for cellular and fixed wireless operators, enterprises and government organizations. Ceragon's modular FibeAir(R) product family is recognized as the gold standard for backhaul transmission and is also one of the top solutions chosen by cellular operators for SONET/SDH rings. A scalable, future-proof solution for wireless transport of broadband services, FibeAir operates across multiple frequencies for IP and SONET/SDH protocols, supporting the emerging needs of next-generation networks that are evolving to all-IP based services, including triple-play. It leads the market in IP backhaul, offering a unique, native IP solution that provides the efficient, robust connectivity required for WiFi, WiMAX and converged networks. Ceragon supports its growing base of more than 180 customers in 70 countries by operating an extensive sales network comprising 17 offices and numerous partners located around the world. More information is available at www.ceragon.com."

David Gardner suggests, and I think rightly so, that among other things, when looking at a company we should ask the simple question: "Would I want one of those?" Here I think 99% of the people on the planet would say, "Yes, I want access to the WWW, to phones, etc.." Ceragon has a product that will allow this to happen with less money and less time, which has got to be very attractive to all developing countries who, necessarily, are tight on cash, but are looking for ways to bring their countries up-to-speed. I also think that a stock like AMX, which has more than doubled in the last year and concentrates on wireless service throughout Latin America, is a good indication of how strong a demand there is for products like Ceragon's to take hold and spread quickly. I also like, as others have mentioned, the growth predictions of (Zack's) analysts: 07=97%; 08=33%; next five years = 24%. Moreover, this last figure should be juxtaposed with the expected growth of the industry itself, which is only 17%. In other words, the analysts are expecting Ceragon to consistently and handily outperform the industry for the next five years. Add to this the low number of shares that are available--27.4M--and it seems safe to say this stock will continue to rise.

Finally be sure to read the very intelligent and more sophisticated analysis that "ianlenobel" lays out for Ceragon in and among these bull pitches.

Ride the wireless wave ... the future is now! More overseas investing. It's a world economy!

The business:

The bulk of Ceragon's business is currently coming from cellular carriers using their point to point wireless data links to backhaul voice/data/video traffic from the cell site (towers) back to cellular base stations. Their solution is an alternative to leasing capacity from the local telco, (copper t1/e1) or, where wired links are not available (developing nations with limited communications infrastructure) their solution is an alternative to laying copper or fiber optic cable which is very expensive.

They offer an industry leading value proposition to cellular carriers looking to add capacity (data/video is the driver here) quickly and economically. Their solution is scalable with software changes and significantly more reliable than copper or fiber (99.999). It is cheaper to deploy and often can be up in a matter of days. Ceragon, unlike its competitors has a competitive advantage. They are capable of addressing the needs of carriers utilizing different access technology (2G, 3G, IP etc...) with a common platform of products (FibeAir 1500P); essentially offering carriers a future proof solution.

The company also sells their point to point links to private network operators (think of connecting buildings on a university campus, or government buildings)

Their IPMAX product would be suitable for WIMAX (4G mobile) backhaul which has the potential to be a huge market.

The company has estimated the size of their addressable market at $1.5 billion currently, but expect that market to grow to 3.5 billion by 2010 (more than 30% CAGR) - they indicated they would continue to take share so look for 30-50% top line growth over the next few years. They have grown revenue at slightly less than 50% CAGR over the last three years.

The Valuation:

This is where things start to get very exciting. Today (April 30th 2007) Ceragon reported $33.9 million in revenue which was an increase of 59% vs the same quarter of 2006. Earnings came in at $.10 vs $.01 a year ago. These results were ahead of expectations and the stock was up 16% on the news. Bet you're thinking you missed the boat here eh? Not a chance.

The company is still trading at an enterprise value to 2007 revenue of 1, 15 times annualized 1st quarter earnings (they should post sequential earnings growth, so this 15 x number is understated) and 11 x next years estimated earnings.

The company has a VERY sound balance sheet with about $30 million in cash and no debt. This will give them a big advantage over their smaller competitors as it will allow them to build inventory quicker for better delivery time.

To give you fellow fools an idea of how undervalued CRNT currently is compared to one of its competitors, have a look at Dragonwave Inc. The company recently completed an IPO (Toronto exchange: DWI) which capitalized the company at more than $80 million CAD. They are on pace to do about $22 million in revenue for the year. YEAR!! And that was up from $19.xx million in the prior year. Trading at 4 X slow growing revenue and not profitable, with limited cash and a whack of convertible debt. Excuse me for not getting too excited. How they pulled this IPO off is shocking (though it shouldn't be surprising......a rant for another day). To put all this into perspective, CRNT would have to trade at about 3 x the current share price to be in line the current valuation of Dragon Inc – an inferior competitor in this fools opinion.

I see two things happening here, Dragonwave will get cheaper and CRNT's share price will continue to appreciate in value. I think one could make a case (hopefully I've at least made a start) that the company will continue to grow revenue at that 40-50% CAGR through 2010. management has indicated a net profit margin target of 10%. So, that gives an annual revenue range of $296 - $365 million and potential earnings of $1-1.24 per share. I think the market would reward such a display of execution with a multiple of 20-25 times EPS or....a $20-30 stock price. This may seem insane, but they have the technology to get them there and a management team to steer the boat. I haven't seen as compelling an investment opportunity in a long time.

Full disclosure: I hold an equity stake in the company and it is also held in client accounts

Market Cap is attractive at $151 M.

Price/sales = 1.37

Forward P.E. = 10.2

5 yr growth est = 25%

Technology= Wi-Max

Never heard of it?

Start here:

http://www.extremewimax.com/

and

http://www.wcai.com/pdf/2005/05presentations/Ackerman_David.pdf

Tiny cap stock with growing revenues in a good business area. Underfollowed, but continued growth serving explosieve markets will eventually result in much higher stock price.