EZCH is a darling of technical analysts, having developed a better edge network management technology some years ago, it has excellent penetration at major network vendors like Cisco and Huwai. In fact 11 of the top 14 carriers use EZCH based equipment. They have over 50% market share and predict potential quadrupling of revenue over the next 5 years. The guru of tech stocks Paul McWilliams has predicted their continued rise to over $60 a share during the next 3+ years. Even better the industry they inhabit is slow changing, so design wins made today last 4-6 years or longer giving continued predictable revenue streams. EZCH has $154m in cash and no debt.
Suddenly this week it announced poor results and worse still predicted a bad year ahead, as recession has slowed investment and capital spending. The stock tanked 25% today from nearly $40 down to below $30, and may well drop another 5% over the next couple of days. Does this present Pragmatic with an ideal candidate for our "downtrodden but will recover" portfolio? I think it does. I will continue to monitor EZCH, but I think at around $25-27 it represents a buy with an upside of at least 30% over the next two years, even if you think McWilliams predictions wrong, and I for one admire his accuracy over time. .
Suddenly this week it announced poor results and worse still predicted a bad year ahead, as recession has slowed investment and capital spending. The stock tanked 25% today from nearly $40 down to below $30, and may well drop another 5% over the next couple of days. Does this present Pragmatic with an ideal candidate for our "downtrodden but will recover" portfolio? I think it does. I will continue to monitor EZCH, but I think at around $25-27 it represents a buy with an upside of at least 30% over the next two years, even if you think McWilliams predictions wrong, and I for one admire his accuracy over time. .
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