Ubiquiti (UI) Surges 9.9%: Is This an Indication of Further Gains?

Ubiquiti Inc. (UI) shares rallied 9.9% in the last trading session to close at $754.73. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 11.8% gain over the past four weeks.

Ubiquiti is benefiting from significant growth opportunities in both emerging and developed economies. These include a relentless pursuit by emerging countries to stay connected with the world through the adoption of wireless networking infrastructure as developed economies aim to bridge the demand-supply gap for higher bandwidth.

Ubiquiti spends significantly on research and development (R&D) activities to develop innovative products and state-of-the-art technology to expand its addressable market and stay on the cutting edge of networking technology. The company believes its new product pipeline will help it increase average selling prices for high-performance, best-value products, thus boosting the top line. The company’s strategic product launches at disruptive prices are tailwinds. Apart from launching products, the reduction of labor-related costs is one of the chief highlights of the R&D initiatives. The company believes investments in R&D, inventory and operations management will help it expand the addressable market and maintain its dominant foothold in the industry.

This computer networking company is expected to post quarterly earnings of $2.48 per share in its upcoming report, which represents a year-over-year change of +15.9%. Revenues are expected to be $678.99 million, up 23.4% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Ubiquiti, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on UI going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Ubiquiti is a member of the Zacks Wireless Equipment industry. One other stock in the same industry, Aviat Networks, Inc. (AVNW), finished the last trading session 5.7% higher at $22.74. AVNW has returned -10.8% over the past month.

Aviat Networks' consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.33. Compared to the company's year-ago EPS, this represents a change of +137.9%. Aviat Networks currently boasts a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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