Cambium Networks Corp’s Internet Tech a Game Changer for CMBM Stock

Unique Technology Brings Wireless Access to Remote Areas

Most people in cities and towns are used to having access to wireless Internet, but there are still regions in the U.S and around the world that lack Internet access.

That’s specifically an issue in many rural areas and emerging countries. In many cases, the cost of building the necessary infrastructure is very high.

That’s where Cambium Networks Corp (NASDAQ:CMBM) comes in. The company supplies wireless Internet radios that provide Internet connections to regions that don’t have them.

The concept is compelling and makes sense, especially in developing countries.

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Cambium Networks Stock Selling 45% Below High

Cambium Networks stock traded as low as $3.57 in May 2020 prior to staging an impressive rally to $66.40 in April 2021.

The below chart shows CMBM stock moving into a golden cross pattern in July 2020. A golden cross is a bullish formation in which the 50-day moving average breaks above the 200-day moving average.

While Cambium Networks stock has been holding to a 121% one-year return, its price has failed to hold and is down by 45% from its high—to below its key moving averages.

Chart courtesy of StockCharts.com

The above CMBM stock chart also shows the emergence of a death cross pattern after the 50-day moving average broke below the 200-day moving average in late August.

This suggests potential share-price weakness and an aggressive investment opportunity in Cambium Networks stock.

Rising Revenue & Earnings Estimates

Cambium Networks Corp’s five-year revenue picture shows three consecutive years of double-digit growth from 2017 to 2019, prior to moderation in 2020, when Cambium Networks still achieved record revenues despite the COVID-19 pandemic.

Fiscal YearRevenues (Millions)Growth
2016$181.4N/A
2017$216.719.4%
2018$241.811.6%
2019$267.010.5%
2020$278.54.3%

(Source: “Cambium Networks Corp.” MarketWatch, last accessed September 20, 2021.)

Analysts’ financial estimates for Cambium Networks have been rising. They estimate that the company will increase its revenues by 30% to $361.9 million this year and by 12.5% to $407.2 million in 2022. (Source: “Cambium Networks Corporation (CMBM),” Yahoo! Finance, last accessed September 20, 2021.)

The expected growth rate is above the past five-year compound annual growth rate (CAGR) of 11.3%.

The company’s return to double-digit revenue growth is encouraging.

Moreover, Cambium Networks Corp has delivered five years of earnings before interest, taxes, depreciation, and amortization (EBITDA) income. This includes an impressive 286.3% surge to a five-year best in 2020.

Fiscal YearEBITDA (Millions)Growth
2016$20.6N/A
2017$23.815.4%
2018$15.4-35.4%
2019$8.4-45.4%
2020$32.4286.3%

(Source: MarketWatch, op. cit.)

The company’s profits have been mixed over the past five years, but Cambium Networks Corp reported a healthy $0.70 of generally accepted accounting principles (GAAP) diluted earnings per share (EPS) in 2020.

Fiscal YearGAAP Diluted EPSGrowth
2016$0.09N/A
2017$0.34301.4%
2018-$0.06-116.6%
2019-$0.69-1,098%
2020$0.70202.6%

(Source: MarketWatch, op. cit.)

An encouraging sign is that the consensus adjusted earnings estimates for Cambium Networks Corp have been rising along with its revenues.

Analysts estimate that the company will grow its adjusted earnings by 74.4% to $1.50 per diluted share this year, followed by $1.76 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

A look at Cambium Networks’ quarterly results shows an earnings beat in five straight quarters to the second quarter of 2021.

The company has also reported positive free cash flow in four of the last five years, including a five-year high of $53.5 million in 2020.

Fiscal YearFree Cash FlowGrowth
2016$14.7 MillionN/A
2017$19.7 Million34.0%
2018-$16.0 Million-181.3%
2019$215,000101.4%
2020$53.5 Million24,780%

(Source: MarketWatch, op. cit.)

Analyst Take

Cambium Networks stock has strong and rising institutional support. About 212 institutional investors currently hold an 86.2% stake in CMBM stock. (Source: Yahoo! Finance, op. cit.)

Valuation-wise, Cambium Networks Corp is attractive, trading at a reasonable 2.3 times its 2022 consensus revenue estimate, 20.6 times its consensus EPS estimate, and at a price/earnings to growth (PEG) ratio of 1.2.