Options Trade of the Week 
Ruckus Wireless Inc (NYSE:RKUS) Calls 
Monday, February 02, 2015

**OPTIONS TRADE OF THE WEEK: Buy the RKUS May 2015 10.000 call (RKUS150515C00010000) at or under $1.50, good for the day. Place a protective stop limit at $0.60 and a pre-determined sell at $2.50.


by Ian Harvey

February 02, 2015


**Ruckess Wireless Ready to Surge Upwards!**

Ruckus Wireless Inc (NYSE: RKUS), a provider of Wi-Fi solutions, as had a tough time of it as of late – due to several catalysts – an over-priced IPO, a slight miss in its 3Q earnings (Ruckus reported revenue of $85 million, but the Wall Street consensus was for $85.1 million) and a string of insider selling reports.

However, the good news is that Ruckess is at a price that is great for an entry of this options trade and other factors will also come into play – such as the IoT (“The Internet of Things”) where the trend toward ordinary devices having Wi-Fi chips built into them allowing people to control their home appliances from their smartphone, eg. “smart” refrigerators will send you a message telling you that you’re out of milk or eggs. This type of operation requires robust hardware and that’s what Ruckus provides. The number of IoT devices is expected to more than quadruple in just the next four years which is a massive opportunity for RKUS.

On top of this, looking at the Q3 earnings report -- on earnings per share (EPS), Ruckus made $0.13, easily outpacing the forecast for $0.10. That was a 160% higher from the same period a year earlier. And while revenue missed, it was a 23.3% increase year over year. The fact is, Ruckus is growing and will keep on growing.

EPS for 2014 is expected to come in at $0.44, with an increase in 2015 to $0.60. (RKUS reports Q4 earnings on Feb. 10). Now check out the price-to-earnings ratio: currently it’s a lofty 152.86, somewhat high even for a tech stock. But its forward P/E, which uses the coming 12 months rather than the trailing 12 months, is just 16.42. Plus, Ruckus has a clean balance sheet with no debt.

Also, analysts at Citigroup started cover at a BUY, whilst two analysts (Oppenheimer and Northland Securities) have upgraded it in just the past two weeks. And it’s a consensus buy among the 20 analysts that follow Ruckus stock. The one-year target is $15.18, nearly 60% higher than where RKUS is trading now.

About the Company

Ruckus stock was founded in 2004 where Ruckus Wireless started out serving the residential Wi-Fi market. In the decade since, the Sunnyvale, Calif.-based company evolved into a global supplier of advanced wireless technology to cities and corporations.

Ruckus sells high-capacity Wi-Fi access points as well as cloud-based Wi-Fi access and location services. RKUS is best known for a technology it calls “Smart Wi-Fi.” It’s designed to work in dense and noisy areas such as urban centers and stadiums.

The Company’s solutions, which it calls Smart Wi-Fi, are used by service providers and enterprises to solve network challenges. The Company’s products include gateways, controllers and access points. These products incorporate its technologies, including Smart Radio, Smart QoS, Smart Mesh, SmartCell and Smart Scaling.

The Company sells its products to service providers and enterprises globally, and as of December 31, 2012, had sold its products to over 21,700 end-customers worldwide. The Company’s enterprise end-customers are typically mid-sized organizations in a variety of industries, including hospitality, education, healthcare, warehousing and logistics, corporate enterprise, retail, state and local government and public venues, such as stadiums, convention centers, airports and outdoor public areas.

The company’s 44,000 clients include such familiar names as Sprint Corp. (NYSE: S), Time Warner Cable Inc. (NYSE: TWC), and LaQuinta Holdings, Inc. (NYSE: LQ).

Ruckus stock went public in November 2012. RKUS employs about 800 people. It has a market cap of $800 million.

Effective July 23, 2013, Ruckus Wireless Inc acquired YFind Technologies Pte Ltd.

Technical Oulook

Wireless has a 1-year low of $8.65 and a 1-year high of $15.50.

The stock’s 50-day moving average is $10.7 and its 200-day moving average is $12.32.

The company has a market cap of $876.3 million and a P/E ratio of 152.86.

The average volume for Ruckus Wireless has been 1.2 million shares per day over the past 30 days.


Ruckus Wireless last posted its quarterly earnings results on Monday, November 3rd. The company reported $0.13 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.10 by $0.03. The company had revenue of $85.00 million for the quarter, compared to the consensus estimate of $85.30 million.

During the same quarter in the previous year, the company posted $0.05 earnings per share. The company’s revenue for the quarter was up 23.4% on a year-over-year basis. Analysts expect that Ruckus Wireless will post $0.44 EPS for the current fiscal year.

Interest Increase

A rise of 89,840 shares or 1.4% was seen in the short interest of Ruckus Wireless, Inc.. Even as the interest increased from 6,577,300 shares on December 31, 2014 to 6,667,140 shares on January 15,2015, the days to cover came in at 5. The updated interest stood at 8.4% of the stocks floats. The counter has an average daily volume of 1,476,173 shares. Shares of Ruckus Wireless Inc appreciated by 6.2% during the past week as well as having outperformed the S&P 500 by 4.52% -- however, for the past 4 weeks the company is lagging.

Analysts Opinions

Citigroup Inc. started coverage on shares of Ruckus Wireless in a research report released last Monday morning. The firm issued a buy rating and a $13.00 price objective on the stock.

Also The Street rates Ruckus Wireless as a hold. ”The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income.“

The company has also been the subject of a number of other research reports:-

• Analysts at Northland Securities upgraded shares of Ruckus Wireless from a market perform rating to an outperform rating in a research note on Wednesday, January 21st.

• Analysts at Oppenheimer set a $16.00 price target on shares of Ruckus Wireless and gave the company a buy rating in a research note on Tuesday, January 6th.

• Analysts at OTR Global downgraded shares of Ruckus Wireless to a positive rating in a research note on Monday, December 22nd.

• Finally, analysts at RBC Capital initiated coverage on shares of Ruckus Wireless in a research note on Thursday, November 6th. They set an outperform rating and a $17.00 price target on the stock.

Two equities research analysts have rated the stock with a sell rating, six have assigned a hold rating, thirteen have given a buy rating and one has given a strong buy rating to the stock. Ruckus Wireless presently has a consensus rating of Buy and a consensus price target of $15.18.


This is an exciting company and a great play on the high-growth market for broadband wireless technology.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE OF THE WEEK: Buy the RKUS May 2015 10.000 call (RKUS150515C00010000) at or under $1.50, good for the day. Place a protective stop limit at $0.60 and a pre-determined sell at $2.50.

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