Bernstein Downgrades Ubiquiti: Here's Why

• The share price of Ubiquiti Networks Inc UBNT has declined 22.68 percent in the last three months, dropping down to $26.58 in morning trade on Thursday.
• Bernstein’s Pierre Ferragu has downgraded the rating on the company from Outperform to Market Perform, while lowering the price target from $49 to $30.
• Although the growth potential in the company Fixed Wireless Access and WiFi segments remains robust, Ferragu said that the risk/reward of owning the stock had become less attractive.

Analyst Pierre Ferragu explained that Ubiquiti Networks’ model does not seem to be gaining traction in the more mature VoIP and Switching segments, while the CFO position has remained vacant for more than six months.

In addition, Ferragu expressed concern regarding operations, given the fraud incident in the summer of 2015, as well as concerns related to the deteriorating situation in the emerging markets.

“Our bullish thesis on Ubiquiti was predicated on the assumption that the company could diversify into new data networking segments and deliver superior returns over multiples years leveraging its unique business model,” Ferragu stated.

However, while the performance of the Fixed Wireless Access and WiFi segments have been strong, despite the challenges in the emerging markets, Ubiquiti Networks has not been able to deliver on expectations with regard to diversification.