UPDATE: Bank of America Initiates Coverage on Ubiquiti Networks with Buy Rating, $21 PT on Positive Outlook

In a report published Wednesday, Bank of America analyst Tal Liani initiated coverage on Ubiquiti Networks UBNT with a Buy rating and $21.00 price target. In the report, Bank of America noted, “We are initiating coverage of Ubiquiti Networks with a Buy rating and $21 PO. Ubiquiti provides networking gear for fixed wireless broadband, wireless backhaul, routing, as well as enterprise equipment, such as WLAN (WiFi), video surveillance, and m2m communication components. The company's key differentiation is its price disruption, selling equipment to under-networked and un-connected regions at 20% the cost of traditional vendors. A unique business model of word-of-mouth marketing and community-based support helps it maintain 30%+ operating margins, despite a low gross margin (~43%). With ~18% normalized EPS growth for 2014 and 2015, we would have normally used industry's ~1.1x PEG (21x 2014 P/E), yet inherent risks in the model and a few recent hiccups, drive a more conservative target of 17x P/E, which could expand upon more consistent execution.” Ubiquiti Networks closed on Tuesday at $20.07.