May 01, 2020 - 12:13pm EST by
2020 2021
Price: 7.60 EPS -.02 .37
Shares Out. (in M): 10 P/E NM 11.5
Market Cap (in $M): 77 P/FCF 42 8.5
Net Debt (in $M): -34 EBIT 1 5
TEV ($): 43 TEV/EBIT 42 8.5

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Airgain (NASDAQ:AIRG) is a super-cheap antenna supplier whose stock retreated with the market but has not recovered with the market. The stock is trading at an Enterprise Value to Revenue multiple of 0.7x, which is extremely cheap for an ongoing concern which is profitable. Net cash makes up nearly half of the company's market cap. While it is true that revenues have shrunk slightly in 2019 and probably in 2020, the company is poised to grow with numerous design wins in all three of its target markets.

In brief, the company supplies antennas to three different markets. Its original market, the home gateway market, features tiny antennas that go into home gateways enabling WiFi, Bluetooth, Zigbee, and other wireless technologies in the home. Airgain dominates this market with wins at Comcast (NASDAQ:CMCSA), Charter (NASDAQ:CHTR), and other large OEMs. This business was somewhat disrupted last year by the tariffs on China and the resulting dislocations in the supply chain. The supply chain was further impacted by the COVID-19 outbreak in China in Q1. A catalyst in this market in 2021 will be the adoption of WiFi 6, the latest WiFi standard that will increase bandwidth within the home.

Two years ago, Airgain purchased a company called Antenna Plus that focused on the automotive market, mostly on the aftermarket fleet space. Airgain has expanded that business, both within the aftermarket arena and in the new automobile area. The company has garnered large design wins in this area, but given the long automotive design cycles these wins will show up in revenue in 2021 and 2022. Airgain has also won more fleet designs, which will lead to revenue in the near term. Automotive is important to Airgain because each antenna in this area sells for $10 - $100, orders of magnitude higher than the $0.25 antennas in the home gateway market.


Airgain's final market is enterprise. This is a new market to the company and similar to automotive, these antennas sell for $25 to $100 each. Airgain's edge in all of its markets is high performance, and it enters enterprise with this edge, as well. The company has already claimed initial design wins in this market, and we look for more to come. The move to WiFi 6 will benefit Airgain in this market as well. While the company does not announce its customers, you can get some sense of design win activity by looking at its most recent earnings call transcript.

I think the company has a nice growth curve ahead of it. As wireless interfaces become more and more prevalent, antennas will become increasingly important. We like the company's management team and believe it can grow revenue for years to come.

On a valuation basis, I think AIRG should trade at least 2x revenue, which would result in a 130% appreciation for the stock to $16 per share.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Revenue growth driven by ramps in any of the company's three markets will drive the stock price higher.

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