Ceragon Overview
February 22, 2005 - Copyright by Morris Rosenthal - - contact info
Company Overviews
Copyright 2005 by Morris Rosenthal
All Rights Reserved
Notes on trading CRNT stock for investing in Israeli stocks
Ceragon Networks Ltd. is dual listed on the NASDAQ and TASE (Tel Aviv STock Exchange) under the symbol CRNT. Their 4th quarter and year end financials for 2004 were filed on Feb 3, 2005. Ceragon is a vertically integrated provider of wireless networking solutions. Their core product is their trademarked FibreAir equipment operating at standard millimeter wave frequencies (6 Ghz to 38 GHz), allowing quick adoption in all of the major telecom markets in the world. The FibreAir products are highly scalable with an economical, defined upgrade path, which encourages customer retention in this competitive and rapidly evolving market.
Ceragon reported year over year revenue growth of 59% for FY 2004. Total revenue for the year was $55 million, resulting in earnings of $0.06 per share. Revenue growth in the 4th quarter extended the winning streak to 13 straight quarters of increasing sales. Gross margins in the 4th quarter were just over 40% of revenue at $6.4 million. Ceragon had approximately $38 million dollars in cash and equivalents at the end of 2004, or about $1.50 per share.Ceragon spends almost as much money on R&D (just under $10 million in 2004) as on marketing (a little over $11.5 million). Administrative and general overhead costs were under $2.5 million in 2004, but grew at an annual rate of 11%.
CRNT shares under performed the NASDAQ by approximately 25% in 2004, and by around 70% since their IPO in 2000. The share price collapsed after the IPO high to a low of less than $2/share in late 2002, but have been trading pretty consistently over $5/share since mid-2003. The largest institutional investor is Kern Capital Management, who held just under 15% of the company at the end of 2004, and overall institutional ownership is around 25%. CRNT shares currently carry a P/E multiple of 83, but this should come down rapidly if the company can continue to grow revenue at the current pace without margin deterioration.
I've owned CRNT off and on for a few years, never quite bought it at the bottom, never quite sold it at the top. Ceragon is a pretty volatile stock, seems to run up each quarter about a month before the quarterly report is filed, then level off or even drop a little going into the report. Ceragon has been growing steadily, but I'd like to see the earnings increase more than they have, would hate to think that expenses are expanding with revenue.
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