TPS Trade Alert – April 28, 2014
April 28, 2014
Recommendation:
Buy Towerstream (NASDAQ: TWER) up to $2.10 per share.
Trade Rationale:
The recent selloff in technology stocks is providing us an opportunity to buy shares in companies we wouldn’t normally be able to recommend. Basically, several good, small companies have appeared on our radar recently that typically aren’t this cheap.
Now, I know many subscribers like the really cheap stocks – under $1. And, I do try to mix in the ultra-cheap stocks and the occasional OTC stock when the opportunity arises.
However, ultimately I’m looking for the best opportunities for us to make money. And, I’m definitely not going to pass up on an investment just because it’s a little more expensive than what I’d like.
That’s precisely why I’m picking Towerstream (NASDAQ: TWER) for our portfolio.
TWER provides 4G technology to deliver advanced, high-speed Internet access to businesses. The company delivers wireless broadband access to 3,500 customers in 13 major US cities.
There are several reasons to like TWER as an investment opportunity.
First off, the company owns its entire network and isn’t dependent on local carriers. That means TWER can offer 99.99% uptime for its services.
Moreover, the company owns valuable rooftop rights and several key urban locations. (Wi-Fi antennae are typically placed on high buildings in urban settings.) For instance, in Manhattan, the company has more Wi-Fi access points than any other provider.
As mobile data traffic grows, TWER’s network is going to be increasingly in demand. By 2017, the company projects 25% of all data traffic will be handled by carrier Wi-Fi and small cell networks like the TWER’s.
By having long-term rooftops rights in major US cities, TWER has a first mover advantage. The company has 10,000 access points for small cell equipment. And, with mobile data expected to increase 9x over the next five years, there will need to be 500,000 to 1 million more small cells installed.
Clearly, that puts TWER in great position for the future.
Even better, the company recently launched a new 100 megabyte service (really, really fast Wi-Fi) which is gaining traction among new customers.
On the financial side of things, the company generated approximately $33 million in revenue over the last year. Analysts expect that number to climb to nearly $40 million this year.
Perhaps more importantly, the company has $28 million in cash and just over $2 million in debt. Current assets are also an impressive 4.9x current liabilities. Basically, management could easily pursue accretive acquisitions or aggressive internal expansion.
Nevertheless, due to the selloff of Internet and other tech stocks, TWER is trading at the bottom of its 52-week range and well below its major moving averages.
In other words, this stock has very little downside and plenty of upside potential. (A move to the 52-week from this January would be an 82% gain from this level.)
Let’s grab shares of TWER while it’s trading at a bargain basement price.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | Towerstream |
| Ticker: | TWER |
| Recent Price: | $1.87 |
| Market Cap: | $124.2 million |
| Avg. Daily Volume: | 468,590 shares |
Chart:
Category: TPS Trade Alert
