Brightpoint raised to 'strong buy'

The company represents a solid, diversified alternative in the wireless space.

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The future of global communication and culture is without cords and boundaries. Wireless technologies are changing the way we live, work and play. Companies like Apple, Motorola, Samsung, Sandisk, Lenovo, Plantronics and many more are creating products that influence everything we do as a society. Brightpoint (CELL +0.34%) is a necessary catalyst for their continued success and in turn reaps serious rewards from growth in the entire space.

Brightpoint has over 25,000 B2B customers in over 35 different countries. The aforementioned companies are just a few of Brightpoint's customer base. In 2010 alone, the company handled 99 million wireless devices globally.

Company description and developments


Brightpoint has a business model that may be tough for many to grasp without some research.

Essentially, it provides services to companies such as Samsung that include distribution channel management, procurement (of parts and materials), inventory management, repair services (warranty work, etc) and reverse logistics.

It also loads software onto devices after manufacture and offers kitting and customized packaging, fulfillment and product customization to make the products end customers more attractive.

Think of Brightpoint as the outsourcer for just about everything that a wireless company might need, even offering online "stores" for specific companies, such as the Windows phone online shop in the Middle East and Africa that it launched in October 2011.

Being that the wireless segment is growing by leaps and bounds and that many corporations are trying to save every penny in the process, a company like Brightpoint becomes more and more invaluable.

Financial profile


Brightpoint is a small cap company that is trading at about 12.5 times trailing earnings (P/E). Looking forward, Zacks Consensus Estimates see Brightpoint’s P/E dropping to 11, with no change in price from these levels.

Brightpoint rose to a Zacks Rank 1-Strong Buy in the past week.

Analysts have not revised their earnings estimates recently but we did see revisions up and down to current quarter, full year and next year's estimates within the past 90 days.
Last quarter, CELL reported sales growth of 50.5% year-over-year and 8% over the previous quarter with total sales of 3.6 billion in FY2010. Brightpoint is expected to earn $0.91 in FY2011 according to the Zacks Consensus Estimate.

Earnings estimates

Expectations are for Brightpoint to make 30 cents this quarter when it reports on February 1. Being that Brightpoint guided in-line with estimates, I would be less concerned of a surprise. Of the four analysts that cover Brightpoint, the consensus is for the company to grow earnings by 19.08% in FY2011 and 14.09% in FY2012.

Brightpoint surprised analysts to the upside by 23.81% last quarter, with the average earnings surprise being a positive 17.53%. The company reaffirmed its stable earnings outlook in October 2011 for FY2011, back then estimates were expecting Brightpoint to report EPS of $0.32 for fourth quarter and $1.01 for fiscal 2011.

Market performance and technicals

Brightpoint looks slightly different from most of our momentum stocks being that the stock was higher just a year ago, although we are fast approaching that yearly high of $13.11.

CELL was recently looking overbought, but has since corrected and moved into a more advantageous entry position for bulls. The stock remains in a bullish channel (since August) and firmly above its 50- and 200-day moving averages of $10.17 and $9.36 respectively.

Brightpoint has a slightly elevated beta of 1.63, but is a lower dollar stock so it tends to look less volatile than it really is.

Brightpoint has outpaced the S&P 500 by almost 25% over the past year and almost 9% over the past 3 months. The recent move over the past 30 days puts Brightpoint 14% over the index’s performance.

All in all, Brightpoint represents a solid, diversified alternative in the wireless space.

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service

By Zacks.com on Fri, Jan 20, 2012 9:34 AM