Merriman Capital Has Buy On Powerwave Technologies

Merriman Capital is out with a research report on Powerwave Technologies, Inc.

and it has a Buy rating on shares. In a note to clients, Merriman writes, "Powerwave already pre-announced results for the June quarter ($168-172M) which was already reflected in consensus estimates. The company also reinforced its prior annual guidance ($650-680M), although indicated comfort towards the lower end, prompting small revisions in 2H11. The weakness stemmed predominantly from Europe (28% of revenue) which has fed further fears that an AT&T slowdown could further impact numbers. However, AT&T continues to spend (consistent with our checks) and other North American operator investment could provide upside (namely Sprint's Network Vision, which is expected to drive over $2B in 2H11 capex vs. less than $900M in 1H11, and we believe Powerwave is well positioned for the opportunity). We see the risk, if any, in gross margins bouncing back from 26.4% in March (to 29-30%) and the immediate sequential outlook for September (possibly down vs. our flattish estimates). However, we see the overriding issue as new products (active antenna arrays, pico-cells and government solutions) with higher gross margins contributing in CY12. Collectively these products could contribute $50-100M in revenue vs. $5-10M in CY11. Trading at ~8x our potentially conservative CY12 EPS we maintain our Buy rating." Shares of PWAV lost 1 cent yesterday to close at $2.16.