Ceragon Networks Ltd. (CRNT:US) Chief Executive Officer Ira Palti is favoring Africa over the U.S. and Europe for sales growth after two orders from the continent spurred the biggest stock rally since July.
“Africa is one of the hottest telecom growing regions, and an area we can focus on, especially given today’s economy around the world,” Palti said in a phone interview from the company’s headquarters in Tel Aviv yesterday. “We are increasingly more distributed by geography, and this is a major advantage as Europe is recovering very slowly and same with the U.S.”
Ceragon, which sells its technology to telecommunications operators and Internet service providers, surged 7.2 percent to $5.34 in New York yesterday, a one-month high. The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest Israeli companies traded in the U.S. rose less than 0.1 percent in its sixth daily advance, while Cellcom Israel Ltd. (CEL:US) and Partner Communications Co. (PTNR), the nation’s top mobile providers, tumbled. The Tel Aviv benchmark TA-25 stock index fell 0.8 percent today.
Tel Aviv-based Ceragon said yesterday that it received two orders valued at $28 million from existing telecommunications customers in sub-Saharan Africa after announcing two weeks ago a $6.5 million deal with Mozambique Cellular. Africa along with Latin America is providing Ceragon with opportunities for growth at a time when the company is “cautious” about sales in the rest of the world, Palti said.
The U.S. is seeking to avoid $607 billion of automatic tax increases and spending cuts from coming into force next year as its economy continues to emerge from the 2009 recession, while European finance ministers are meeting over a bailout payment for debt-plagued Greece.
Ceragon plunged the most on record in Tel Aviv on Oct. 31 after reporting third-quarter net income that trailed analysts’ estimates and cutting its sales forecast for the last three months of this year. The company’s largest market is Latin America which comprised 34 percent of sales in the third quarter, according to an Oct. 29 statement. Sales from Africa fell to $8 million in the same period.
Shares of Ceragon traded in Israel slipped 3.1 percent today to 20.48 shekels, or the equivalent of $5.32, after jumping 9.9 percent yesterday, the biggest one-day advance since October 2009.
Revenue in the fourth quarter and “coming quarters” is expected to total between $105 million and $110 million, Palti said yesterday, reiterating a forecast issued on Oct. 29.
U.S.-traded shares in the company have lost 31 percent in 2012 as telecommunications equipment providers including Finland’s Nokia Siemens Networks and Paris-based Alcatel-Lucent SA (ALU) cut jobs and spending amid the slowing global economy. Deutsche Telekom AG (DTE)’s T-Mobile unit, Telefonica SA (TEF) and America Movil SAB (AMXL) are among Ceragon’s clients.
Ceragon trades for 22 times estimated earnings, compared with the average multiple of 13 for companies included in the Bloomberg Israel-US measure, data compiled by Bloomberg show.
The stock is overvalued given business from Ceragon’s larger customers has been inconsistent, according to Blaine Carroll, an analyst at Avian Securities LLC, who rates Ceragon neutral.
“The orders from the bigger carriers can be lumpy,” Carroll said in a phone interview in New York. “They have great opportunities in front of them but the near-term visibility just doesn’t support the valuation.”
Cellcom, based in Netanya, Israel, plunged 4.1 percent yesterday in New York to $9.38. Its shares in Tel Aviv fell 2.6 percent to 36.35 shekels, or $9.44. Rosh Ha’Ayin-based Partner sank 3.5 percent to $6.05. The Israeli shares fell 0.5 percent to 23.69 shekels, or $6.16 today.
Given Imaging Ltd. (GIVN:US) fell in New York after the Israeli Securities Authority said it is investigating whether Nochi Dankner, chairman of IDB Holding Corp. (IDBH), which owns a stake in Given through two units, engaged in “securities fraud.” Given dropped 1 percent to $18.16. Its Tel Aviv shares dropped 3 percent to 69.23 shekels, equal to $17.99.
Yokneam, Israel-based Given said last month that it’s been approached about a possible sale of the company. IDB has been selling assets, including a stake in Clal Industries & Investments Ltd., to avoid defaulting on debt and to pay back creditors. IDB shares in Tel Aviv plunged 7.4 percent today to 14.07 shekels.
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