Universal Electronics Stock: Buy This Turnaround Story After The Recent Dip

seekingalpha08-26

As seen with its recent post-earnings plunge, investors remain skeptical about a Universal Electronics comeback.However, the latest results suggest that UEIC's turnaround is starting to take shape. ...

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Th","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4554":"元宇宙及AR概念","BK4532":"文艺复兴科技持仓","IMMR":"浸入科技","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","LU0823414478.USD":"法巴经典能源转换基金","BK4585":"ETF&股票定投概念","BK4108":"电影和娱乐","BK4523":"印度概念","BK4507":"流媒体概念","GNRC":"Generac控股","LU1861558580.USD":"日兴方舟颠覆性创新基金B","BK4524":"宅经济概念","BK4588":"碎股","LU1878469433.USD":"THREADNEEDLE (LUX) - AMERICAN SMALLER COMPANIES \"A\" (USD) ACC","TTM":"塔塔汽车","BNED":"Barnes & Noble Education, Inc","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","BK4086":"建筑产品","REZI":"Resideo Technologies, Inc.","BK4078":"消费电子产品","BK4096":"电气部件与设备","BK4200":"专卖店","BK4099":"汽车制造商","BK4548":"巴美列捷福持仓","BK4170":"电脑硬件、储存设备及电脑周边","UEIC":"Universal Electronics Inc"},"translate_title":"环球电子股票：在近期下跌后买入这个扭亏为盈的故事","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"UEIC":1,"TTM":1,"REZI":1,"IMMR":1,"GNRC":1,"BNED":1},"content_text":"As seen with its recent post-earnings plunge, investors remain skeptical about a Universal Electronics comeback.However, the latest results suggest that UEIC's turnaround is starting to take shape. There may be other potential catalysts at play as well.Add in other positives, like the stock's wide discount to book value, and it's clear that the risk/reward proposition with UEIC stock is tilted in your favor at current prices.  Universal Electronics (UEIC) has historically been a provider of TV remote control products, but the company is moving into faster-growing areas like HVAC control and home automation technology. Giuliano Benzin Universal Electronics (NASDAQ:UEIC), historically a provider of remote control products for television sets, has for years been contending with the impact of economic and technological changes. This has resulted in a massive decline in price for UEIC stock. Trading for prices north of $60 per share as recently as 2021, shares today trade for just over $8.50 per share. While UEIC seemingly was starting to embark on a recovery earlier this year, since the company's latest quarterly earnings release, shares have coughed back the bulk of these gains. But while frustrating for those already in the stock, it's not as if the turnaround catalyst has completely disappeared. Furthermore, there may be additional potential catalysts that could mean even greater upside for shares in the future. Add in additional positives, plus the fact that one particular concern for this stock may be erroneous, and there's much to suggest that shares are worthy of a buy. UEIC Stock: Background and Latest Developments As mentioned above, Universal Electronics has had a rocky past few years. In a nutshell, the rise of streaming devices and services has, and continues to, severely impact UEIC's legacy business. Between customers \"cutting the cord,\" as well as scaling back purchases of big-ticket electronic items like television sets, UEIC sales to traditional cable service providers, as well as television manufacturers, have trended downward since 2019. During this timeframe, Universal Electronics has gone from annual revenue of $763.5 million, to revenue over the trailing twelve-month (TTM) period of just $387 million. During 2020 and 2021, a profitability boost during the Covid era helped to counter the initial streaming-driven drop in UEIC's top line. But as Seeking Alpha commentator Carles Diaz Caron discussed in his January write-up on UEIC stock, a further drop in demand, coupled with inflationary pressures, resulted in a big drop in profitability during 2022, with the company reporting heavy net losses during 2023. With such a dramatic change in UEIC's fiscal performance, it's not surprising that shares have experienced such a dramatic decline in price: Data by YCharts That said, Universal Electronics is making progress getting back to consistently profitability and increased sales. At least, that's the takeaway from recent results. Even as the market continues to have a \"show me\" stance towards UEIC's strategy, for those just entering the stock today, this fact further enhances its appeal. Priced for Disappointment Management may be at work with a plan to get Universal Electronics, and in turn, UEIC stock, moving in the right direction once again, but UEIC's wobbly price performance over the past twelve months indicates the market's level of confidence that a turnaround will ultimately take shape. Of course, given the latest quarterly earnings release, it's not surprising that uncertainty runs high among investors. There were some major positives with UEIC's results for the quarter ending June 30, 2024. These included year-over-year improvement in the company's gross margins (from 22.9% to 28.7%), as well as a halving of its GAAP operating losses. Only time will tell, yet so far, it appears that UEIC's turnaround strategy, which entails reducing costs, stabilizing the remote control business, and expanding into areas like HVAC control and home automation technology, is starting to pay off. The company's updates to outlook weren't bad, either. For Q3 2024, UEIC expects a sequential increase in net revenue, and additional improvements in reducing net losses. However, Universal Electronics once again reported a YoY double-digit drop in sales, from $107.4 million during Q2 2023, to $90.5 million during Q2 2024. While the company did narrow losses during the quarter, compared to sell-side estimates issued ahead of earnings, losses came in wider-than-expected. Again though, this negative reaction to the latest results may just well work in your favor. Following the latest drop, the prospect of an earnings rebound is now heavily discounted. A Path Back to $10-$15 Per Share When it comes to a Universal Electronics comeback, there may be more in play besides the company's own solid execution of its turnaround. As inflationary pressures cool, and if the Federal Reserve pulls off a much-desired \"soft landing\" for the economy, macro conditions could also be on the company's side. In the quarters ahead, results could continue to improve. If UEIC re-hits consistent profitability, this will likely lead to an outsized jump in the UEIC stock price. At current prices, UEIC stock trades for just 10.5 times analyst consensus for 2025 earnings (82 cents per share). Some forecasts call for UEIC to report earnings of as much as $1.34 per share next year. For reference, the median valuation for consumer electronics stocks is around 15x. Based on 2025 consensus estimates, Universal Electronics currently trades at a forward EV/EBITDA ratio of 6.65, versus a sector median of around 10. In short, this may mean that re-hitting $10-$15 per share, merely on improved results that meet consensus, is well-within reach. However, besides the growing potential of improved results, there is another set of possible catalysts that could really move the needle for shares. It all has to do with Universal Electronics' patent portfolio. Patient Portfolio/Litigation Another Potential Catalyst As research firm BuySide Report has discussed in tweets from its X.com account, another factor behind this stock's appeal is the company's patent portfolio. UEIC owns over 600 patents. This may make it an attractive \"bolt-on\" acquisition target for another company in the home control technology space. For instance, companies like Generac (GNRC) and Resideo (REZI). These entities much larger than UEIC, and thus perhaps in a greater position to pay up for the company, due to the potential growth and cost synergies. Even if strategic acquirers aren't interested in Universal Electronics, there is another way the company could profit from its intellectual property. Earlier this year, a Federal court decision affirmed a ban on the import and sale of products from Roku (ROKU) that were found to infringe on one of UEIC's patents. One industry commentator may have been quick to point out that the patent suit was \"pointless,\" given it involved products that Roku no longer sells, but for UEIC stock investors, this development may not necessarily represent \"small potatoes\" news. Why? This ruling has paved the way for this company to pursue money damages from Roku and its manufacturing partners. Potential Risks/Concerns, Including Immersion's Involvement Besides the risk that the performance of Universal Electronics' legacy business worsens, there is another concern that may help explain why the market remains hesitant to buy UEIC stock. That would be the involvement of haptic technology company Immersion (IMMR) in the operations and affairs of Universal Electronics. Immersion, which is run by activist investor Eric Singer (formerly of VIEX Capital), owns around 12% of UEIC, through its Toro 18 Holdings subsidiary. Late last year, Singer joined the company's board, and there are plans to give Immersion further board representation. In most situations, the involvement of an activist investor would be welcomed, However, based upon other online discussion of UEIC, there may be concerns that Immersion will gain the upper hand in transactions with the company. This is based mainly on IMMR's involvement in the recapitalization of Barnes & Noble Education (BNED). However, it may be erroneous to believe that Immersion is poised to gain, at the expense of existing UEIC stock investors. UEIC has a much-less levered balance sheet than BNED did before its recapitalization. The two companies could eventually explore a merger of their own, given the overlap between their respective lines of business. Bottom Line on Universal Electronics Stock Speaking of UEIC's balance sheet, there's another factor that bolsters the stock's appeal from a risk/return standpoint. As of its latest financials, Universal Electronics has a book value of $12.32 per share. That's a more than 30% discount to present price levels. Although tangible book value is often a more relevant metric than total book value (which includes items like goodwill and intangible assets), that may not apply to UEIC. The company wrote off past acquisition goodwill years ago, and intangible assets are on the books at only $25.2 million.  Weighing what may be limited downside risk, against the possibility of UEIC stock re-hitting $10, $15 or even more per share due to the aforementioned catalysts, and clear that the recent post-earnings dip, far from a warning sign, may mean the opportunity to pounce on this turnaround play at a favorable price.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.28.3","shortVersion":"4.28.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2462462918"}