Universal Electronics Inc. (UEIC) has seen its share price drop by approximately 6.6% so far this year.
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Based in Scottsdale, Arizona, Universal Electronics is a leader in wireless solutions for home entertainment and smart-home devices. (See UEIC stock charts on TipRanks)
From the Most Recent Quarter
The second quarter of fiscal year 2021 went quite well for Universal Electronics, even though the company had issues fulfilling orders from customers. Earnings per share of $0.98 surpassed market expectations by $0.06, although revenues dropped by almost 1.7% on a year-over-year basis, to $150.5 million.
Gross margins improved as well, rising by 200 basis points up to 30.5%. Cash reserves increased, while debts remained unaltered.
Universal Electronics managed to produce a positive operating cash flow in the quarter, a concrete measure of the company’s ability to create value. This is despite the presence of non-favorable macroeconomic conditions, caused by the COVID-19 pandemic.
Market, Business Outlook, and Catalysts
People want to live in a smart environment, where they can have full control of all interconnected technologies using a simple device.
The smart-home market is constantly evolving, providing its operators with fresh ideas to increase profits. The Home Entertainment segment holds particular value, as economists expect that households will increase their spending on leisure activities, going forward.
Universal Electronics is strongly positioned in this regard, with its new Apple TV remote control for multichannel video programming. The company expects demand for this device to grow significantly, starting in the second part of 2021.
UEIC Valuation
The share price does not look expensive at the moment, which enhances the likelihood for a profitable investment.
As of August 18, shares were changing hands for $49.17 apiece, well below the 200-day simple moving average line ($52.66) and above the 50-day simple moving average line ($47.03). What’s more, the market capitalization is approximately $653.5 million.
Wall Street’s Take
In the last three months, two Buy ratings have been assigned by Wall Street analysts. So, Universal Electronics Inc. is a Moderate Buy. At $70, the average UEIC price target implies approximately 44.4% upside potential.
Summary
Universal Electronics Inc. is a resilient company. Not even the most hostile obstacles posed by the pandemic have prevented this company from remaining profitable.
Shareholders shouldn’t worry too much about this year’s dip, given Universal Electronics’ prospects and catalysts. The current share price presents an opportunity to increase ownership in this company at a lower cost.
Disclosure: On the date of publication, Alberto Abaterusso did not have any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
