Sierra Wireless (SWIR): Shares defining bullish 'pennant'

Posted Feb 15th 2008 1:51PM by Larry Schutts
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ), Technical Analysis, Stocks to Buy

Sierra Wireless (NASDAQ: SWIR) is engaged in the development and marketing of wireless communications modems. Its products permit laptop computers, handheld mobile computing devices and vehicle-based systems to access wireless data and voice communications networks. Sierra's devices are used primarily by businesses and government organizations to enable their employees to connect with the Internet, e-mail, corporate intranets, remote databases, and computer-aided dispatch units. Customers include AT&T (NYSE: T), Sprint Nextel (NYSE: S) and Verizon Communications (NYSE: VZ).

The firm pleased investors last week, when it reported Q4 EPS of 37 cents and revenues of $135.6 million. Analysts had been expecting 35 cents and $125.7 million. In discussing the solid quarter, the CEO pointed to the successful launch of new products. Management also guided Q1 EPS to 30 cents (28 cent consensus) and Q1 revenues to $136 million ($120.71M consensus). JMP Securities subsequently reiterated its "strong buy" recommendation.

The share price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers recommend the shares with seven "strong buys", eight "buys", two "holds" and one "underperform". Analysts see a 29% average annual growth rate, through the next five years. The SWIR P/E ratio (14.46), PEG ratio (0.50), Price to Sales ratio (1.03), Price to Book ratio (1.75), Price to Cash Flow ratio (9.83), Price to Free Cash Flow ratio (12.21), Sales Growth rate (98.54%) and EPS Growth rate (311.11%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 54% of the outstanding shares. Over the past 52 weeks, the stock has traded between $11.98 and $28.10. A stop-loss of $13.95 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Tags: fundamental analysis, FundamentalAnalysis, momentum, pennant, Sierra Wireless, SierraWireless, SWIR, technical analysis, TechnicalAnalysis