JWells
Saturday, March 31, 2012
Towerstream $TWER Officially announced a Contract without details
Towerstream $TWER filed an 8-k late Friday, with the SEC, stating they have a contract with a carrier. They didn't give any details. This would explain why the stock was particularly strong Friday. On Monday, we should get some real details on what the details are, so stay tuned. Oh, check out how I value Tower to help you with your decisions.
How to Value Towerstream $TWER for Monday
Crown Castle recently acquired Next G (a private company similar to towerstream). Next G has 7000 nodes built. Crown Castle paid $1 billion to acquire Next G. So to find a value for tower we can should determine what the going rate is for a node. From here we can get a rough estimate of what Tower might be worth. Knowing this helps us determine how to handle our position. Applying some simple math to Next G $994,000,000/7000nodes give us the price per node of $142,000.
When we apply this to Towerstream, we can determine its current value of 1500 nodes @ $142,000 gives us a market cap of $213,000. Since Tower has 55 millions shares, we can value them at about $3.87 (213/55).
Towers said they will build an additional 3000 nodes at a minimum over the next 12 months. So the market cap based on the price paid by Crown Castle for Next G would be 4500*142,000=$639,000,000. Divide this by 55 million shares and we arrive at $11.61.
Now we know what an acquisition price is for the company, we need to see if the contract they have signed is inline with tower industry metrics. If they are, then these prices are great points of reference. Should the contract come with different metrics, then we will have to regroup and do a little more math.
Assuming the contract is within the norm, I think we will see shares in the neighborhood of $7 next week before taking a bit of a breather, then we should see shares begin to climb towards the low teens sometime in the fall.
This could all change very quickly though. Jeff Thomson, CEO of Towerstream said that talks with all carriers are fluid. So any additional contracts with other carriers will certainly be a positive. But, he said the cable companies are being equally aggressive, yet not quite as far along (I suspect).
We could be sitting on a real rocket ship with this one.
PS. If you read this please click an Ad (honor system)
Tuesday, March 27, 2012
Oclaro $OCLR Is this merger a Good Deal for Oclaro Shareholders?
I think So! Buy low and Sell high is the objective. Sure, they have some challenges, but I think buying right here will be a excellent opportunity. More on this after my appointment.
I was hopeful that Oclaro was executing the business model back to pre-flood levels in my previous posts and that we would see earnings improve in the coming quarters. I am a little less confident this will be the case, but only a little less confident. I listened to the conference call yesterday and could only think that Oclaro has lost market share to Finisar and, as a result, had to "buy" business.
This is in fact what they did. But, as I have bought Oclaro at (what I think) will be a market bottom, it makes me feel good that management shares in my thinking. Buy low and sell high is what its about. Oclaro shareholders paid 177m for 212m in revenue at peak flood revenue effects. So, not a bad deal, I think. But here is the nugget of chocolate-Opnext guided March quarter at $73m (midpoint). Putting some math to that we can see Oclaro really bought 292 million in revenue for 177m.
I also listened to Opnext's most recent conference call. They indicated that come June quarter they expect to be at preflood revenue levels. This puts the merger in its most favorable light. If this is true, Oclaro purchased 380 million in revenue at a 53% percent discount and thus may see a 100% ROI on this merger. I think the risk is worth the reward at these levels.
I am not sure shareholders of Opnext will approve this deal because I think they will suffer the most, so I speculate that Opnext has lost market share more than anyone and that I think we shouldn't expect revenues to reach preflood levels by June. I am modelling out more of the 85m area and thus Oclaro likely paid 177m for 340m in revenue.
In looking at the product overlap, there doesn't appear to be much overlap and management said that a merger will help margins as more internal component parts will be designed into more complex components, where before they were outsourced. Also, some savings will be realized (longer term) in closing and consolidating fixed assets.
I will be listening very closely during the Oclaro's and Opnext's next conference calls and will keep you posted. But I think this is a very compelling price to buy Oclaro at this level.
Jwells
PS. please look at a "commercial" to help me continue thoughtful content.
JWells
I was hopeful that Oclaro was executing the business model back to pre-flood levels in my previous posts and that we would see earnings improve in the coming quarters. I am a little less confident this will be the case, but only a little less confident. I listened to the conference call yesterday and could only think that Oclaro has lost market share to Finisar and, as a result, had to "buy" business.
This is in fact what they did. But, as I have bought Oclaro at (what I think) will be a market bottom, it makes me feel good that management shares in my thinking. Buy low and sell high is what its about. Oclaro shareholders paid 177m for 212m in revenue at peak flood revenue effects. So, not a bad deal, I think. But here is the nugget of chocolate-Opnext guided March quarter at $73m (midpoint). Putting some math to that we can see Oclaro really bought 292 million in revenue for 177m.
I also listened to Opnext's most recent conference call. They indicated that come June quarter they expect to be at preflood revenue levels. This puts the merger in its most favorable light. If this is true, Oclaro purchased 380 million in revenue at a 53% percent discount and thus may see a 100% ROI on this merger. I think the risk is worth the reward at these levels.
I am not sure shareholders of Opnext will approve this deal because I think they will suffer the most, so I speculate that Opnext has lost market share more than anyone and that I think we shouldn't expect revenues to reach preflood levels by June. I am modelling out more of the 85m area and thus Oclaro likely paid 177m for 340m in revenue.
In looking at the product overlap, there doesn't appear to be much overlap and management said that a merger will help margins as more internal component parts will be designed into more complex components, where before they were outsourced. Also, some savings will be realized (longer term) in closing and consolidating fixed assets.
I will be listening very closely during the Oclaro's and Opnext's next conference calls and will keep you posted. But I think this is a very compelling price to buy Oclaro at this level.
Jwells
PS. please look at a "commercial" to help me continue thoughtful content.
JWells
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