Ruckus Wireless (RKUS)

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“Hyper-Fi” Teased to Drive $10 stock

WHAT'S THE SOLUTION TO THE LATEST OXFORD CLUB TEASE?
Posted on February 2, 2015 by Travis Johnson, Stock Gumshoe

This one caught the attention of several readers over the weekend, with lots of those 4,000% and 5,000% attention-getting numbers that make you dream of yachts and private planes… and, as luck would have it, one of our fantastic readers sent in a quick nicely-rounded look at it along with his solution, so I can share that with you in a moment, trying to make this speedy so we can get it out before we lose power as Winter Storm Linus blankets us with snow.

Heh heh. Sorry, that blanket pun is courtesy of Mrs. Gumshoe. We’re all stuck here together in a weather lockdown on Gumshoe Mountain and getting a little punchy. I’m guessing it it will be a while before the plows can even make it to our driveway… and presumably the plow drivers are all a little hung-over from celebrating the Super Bowl last night.

So what’s that ad? It’s from the Oxford Club in an ad for their basic membership and subscription to The Communique, and they’re talking up the crisis of “too much data” …

“‘Hyper-Fi’

“The Only Solution to the Devastating $1.5 Trillion Wi-Fi Shortage Coming to the Internet

“Only one company owns a monopoly on this patented technology

“Research proves the demand for this market will soon surge 5,400%

“Here’s why I calculate this $10 stock will will see revenues rise 4,445% along with it.”

The “overwhelmed wireless networks” spiel has certainly been used before, to justify everything from the cell tower companies (AMT and the like) to Qualcomm (QCOM) to various technology stocks that claim an edge on speeding up the internet or the mobile networks, or the devices that connect to these networks. It seems very unlikely that there’s one solution, or that one standard developed by a little company will dominate the solution… but, well, hope springs eternal. S

Some more hype and clues if you’re playing along at home:

“… by 2020, research shows each person will own at minimum 50 Internet-connected gadgets… maybe even more!

Irregulars Quick Take
Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? log in at top right)“The GSM Association estimates connecting nearly 25 billion devices by 2020, while Cisco and Ericsson think we will hit 50 billion….
“The current wireless system can’t handle it all.

“And very soon, we’re going to run out of capacity.

“You may have experienced some of the early consequences already…

Not being able to make a phone call when you’re at a sporting event or airport…
Internet that comes to a grinding halt when you get more than two computers on one network…
Interruptions and dropped signals when you are watching videos online…
Picking up someone else’s radio in your car…
Or when, just for example, you’re chugging away at work on a snow day and the rest of the house us full of people watching Netflix streams on mobile devices.

So what’s the solution? Well, of course there we come to our “one small company” ….

“A humble company out of California has created – and perhaps more importantly, patented – a type of supersignal…

“It’s a next-level version of Wi-Fi we like to call ‘Hyper-Fi.’

“And what it does is quite remarkable…

“Think of it like the difference between a TV antenna and cable.

“With a TV antenna, there are all kinds of distortions. Signals get crossed. Energy outlets like microwaves warp the reception. Everything has to be perfect for it to work right.

“With cable, you get your own direct signal that ensures a constant, clear signal.

“Hyper-Fi works the same way. It uses a focused ‘dynamic’ beam to give users a powerful signal unlike anything offered in the current wireless world. It’s like having an ‘invisible wire’ going straight to your device.”

And…

“As the lone holder of this patented technology, this company has more customers coming in than it can handle.”

So that sounds kinda exciting. How about a few more specific clues to get us to the name of the stock?

“… we calculate the wireless market is going to swell to $1.5 trillion by 2020.

“For the moment, Cisco gets the lion’s share of that figure.

“But it doesn’t have the patented Hyper-Fi technology this company owns.

“Consider… the company behind Hyper-Fi only went public in 2012. And it’s already nipping at Cisco’s heels….

“… this is a $900 million company… with about $330 million in revenue….

“In the most recent quarter, net income soared 151%. Gross margins are near 70%.

“And quarterly earnings growth is already up a mind-blowing 6,135% year over year.

“And yet the stock still trades for only $10 because it is just getting off the ground floor with this technology.”

Now, yes, the Thinkolator can get a solution to this one for you too — but an alert reader sent in his own summary of the stock over the weekend, and I checked and he’s right about the stock, so I’ll let him sum it up for you since I haven’t researched the company yet… this following in italics comes from a reader, Tom, who’s been with us since the very beginning of Stock Gumshoe (that was way back in 2007, if you’re curious):

IT APPEARS this is Ruckus Wireless, Inc.(RKUS), which meets the criteria IPO 2012, (near) $10/sh., market cap $891M ~ $900M. The company is a carrier-class Wi-Fi access provider, as seen Yahoo! http://finance.yahoo.com/q/pr?s=RKUS+Profile

Caught my curiosity, so did some digging and thought I’d pass it along. Couldn’t match up the astounding earnings growth referenced, though growth appears solidly above value having a very low PEG, with 2014 earnings average estimate of $0.44 (which provides for a PE of 24) and 2015 of $0.60 (December), giving it a growth rate of 36 (0.6/0.44-1)*100, or valuation 50% below growth. So in 1 year will it be 50% higher, or ~$15/sh.?

Zacks gives it a 2 “buy”.

GuruFocus does not seem to support the Yahoo data, suggesting to me a lower value.

If RKUS is in a range, it is currently at the bottom of it and so would be worth looking for a buy entry. Looking back more than a year, RKUS tends to move up 2 to 3 weeks prior to earnings, then pull back. It has already moved up the last 2 weeks. The earnings are due out in 2 more, on 2/10/15.

Back to Travis now — Tom’s right about it being Ruckus that’s touted by the Oxford Club folks… it is posting those numbers, it is a fairly young company, it trades for about 25X current-year earnings and analysts think it’ll grow earnings at 15-20% in the future… and it has beaten earnings estimates handily for four quarters in a row but still has a pretty moribund share price, so I have no idea what will happen when they report earnings a week from tomorrow.

Will rush this out to you now in case I lose power, so discuss among yourselves — any hope for RKUS? Dreams of lucre? Snorts of skepticism? Let’s hear it, just use the friendly little comment box below.
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RKUS