Ubiquiti (UI - Get Rating) was trading at $144 at this time last year. The stock declined during the market selloff that occurred when the coronavirus was identified as an emerging and legitimate threat to human social activity and the overarching economy. However, UI quickly moved back up to its prior trading range, spiked in the late spring, and made a massive jump to $270 in early November. UI then traded sideways before escalating toward $350 in recent weeks.

UI is generating interest from investors largely because its wireless networking solutions and products are coveted by companies of nearly every type and size. UI’s offerings are created with proprietary technologies, meaning they are difficult to replicate. Examples of UI products and solutions include tools for management and high-performance radio antennas.

Can UI continue to ascend? Will the stock hit a ceiling in the days or weeks ahead? Let’s attempt to answer these questions with a deep dive into UI that helps investors determine whether UI is worthy of buying in February 2021 or if it is a better idea to wait for a potential pullback.

UI’s Merits

UI’s recent second-quarter earnings have helped propel the stock higher than most investors could have imagined. UI’s second-quarter revenue spiked 56%, hitting $479.4 million. The consensus estimate was significantly lower, coming in at $364 million. UI’s adjusted earnings per share came in at $2.53, while Wall Street analysts expected $1.77.

UI also repurchased $55 million of its stock in the second quarter, making it clear the company’s brass is bullish on its future. UI executives attributed the company’s revenue growth to a hike in direct sales by way of its web-based store. The alterations in the product mix helped boost UI’s gross margin all the more.

Furthermore, UI was negatively impacted by the Trump administration’s China tariffs. UI imports all of its products directly from China. Thankfully, those tariffs are now being partially reversed.

UI According to the Analysts

Across the past 250 days or so, UI’s average price target has generally moved upward. Take a close look at the analyst price target trend for UI, and you will find it is steadily increasing at a rate of $3.85 every three weeks. It is also worth mentioning that the average analyst price target for the stock is higher than more than 93% of publicly-traded companies in the Electronic Equipment industry. You can all the price targets by clicking here.

UI POWR Ratings

UI has an overall grade of C, which equates to Neutral, in our POWR Ratings system. Its Growth grade is C, and its value grade is C. If you would like to learn more about UI’s performance in additional POWR Ratings metrics such as Momentum, Stability, Sentiment, and Quality, click here.

Out of 57 stocks in the Technology – Communication/Networking industry, UI is ranked 25th. For other top stocks in that industry, click here.

Is UI a Solid Tech Stock for the Year Ahead?

It isn’t easy to endorse UI as a solid investment considering its lofty trading price and accompanying forward P/E ratio of 45. A forward P/E ratio at this level is certainly acceptable for a tech stock, yet there is a good chance investors will take some profit off the table in the near future. Plus, its POWR Ratings are not encouraging. It may be best to wait for the stock to be upgraded to a Buy or Strong Buy before considering a position.

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UI shares were trading at $341.29 per share on Thursday morning, down $4.79 (-1.38%). Year-to-date, UI has gained 22.68%, versus a 4.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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