Aerohive Networks Could Stage a Major Rally
In January, prior to the subsequent selling capitulation in February, there weren’t many bargains out there that didn’t already make strong advances.
In my search for beaten-down small-cap technology stocks with high return prospects, I came across Aerohive Networks Inc (NYSE:HIVE).
My bullish thesis for HIVE stock lies in the company’s solutions in the hyper-growth area of cloud mobile networking—aiding companies connect mobile devices to their networks in a secured manner.
The demand for solutions is broad and includes enterprise, technology, education, retail, financial services, and healthcare.
HIVE stock displays an ugly price chart with two major downside trade gaps over the past year. It is currently searching for chart support.
Chart courtesy of StockCharts.com
Aerohive Networks stock just bounced off a four-year low at just above $3.00 and appears to be ready for a potential upside move.
On the chart, HIVE stock could be in the process of forming a bullish rounding bottom with an eventual test of $6.00, representing a gain of nearly 50%. A break of $6.00 could drive Aerohive Networks stock to the $7.00 to $8.00 levels or a near doubling.
My Bullish Case for HIVE Stock
For Aerohive Networks to reward investors, the company clearly needs to deliver results.
The company is undergoing some execution issues at this time, but if they can be resolved, we would likely see a big bounce in HIVE stock.
So far, the company has managed to deliver consistent revenue growth over the past four years beginning with $71.21 million in 2012 to $169.82 million in 2016.
Unfortunately, Aerohive Networks reported a relapse in 2017 when revenues fell to $152.9 million.
Heading into 2018, the company is predicted to increase revenues by 4.3% to $159.49 million, followed by 13.2% to $180.59 million and as high as $187.96 million in 2019. (Source: “Aerohive Networks, Inc. (HIVE),” Yahoo! Finance, last accessed March 2, 2018.)
Aerohive Networks continues to burn through its cash, but the annual losses have been on the decline, with the potential for profits this year. For 2018, the consensus EPS is $0.13 per diluted share but there is a high estimate of $0.18 per diluted share.
Aerohive Networks is facing issues that look temporary, as the next two years look more promising.
HIVE stock is trading at a reasonable 24-times its high EPS for 2019. If the company can deliver growth and consistency, there is a good chance HIVE stock could stage a strong rally and reward investors.