Why Ubiquiti Networks (UBNT) Stock Is Lower Today

NEW YORK (TheStreet) -- Ubiquiti Networks  (UBNT) stock is sinking on Friday after analysts raised questions on an unexplained increase in inventory.

Deutsche Bank reiterated its "hold" rating but lowered its price target to $35 from $42.

"The headline number was solid and guidance bracketed consensus; but there were too many unanswered questions around the increase in inventory, which has quadrupled in six months," wrote analysts. 

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JMP Securities kept its $53 price target, but wrote, "Inventory increased to $66M from $32M sequentially, raising concerns over excess inventory."

Analysts at Pacific Creast agreed, writing, "A material increase in inventory for the second quarter in a row creates concern around execution risk."

The communications company earned 50 cents a share over the three months to March, a penny higher than analysts surveyed by Thomson Reuters expected. Revenue of $148.3 million rose 78.2% year over year and exceeded estimates by $6.4 million.

For its fourth quarter, Ubiquiti anticipates revenue between $147 million and $153 million and earnings of 48 cents to 52 cents a share. Analysts expected $150.45 million and 50 cents a share. 

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Separately, TheStreet Ratings team rates UBIQUITI NETWORKS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate UBIQUITI NETWORKS INC (UBNT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

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