Today, a comprehensive report on Teleste, a traditional technology company from Turku, was released. In its honor, let’s open a dedicated thread for the company here on the forum!
In recent years, the big question has been whether we’ve reached the bottom of the hill and are ready to take the lift back up. Earnings estimates have declined fairly steadily in recent years, and now expectations for the coming years are becoming quite reasonable and realistically achievable in light of the company’s historical development. However, near-term earnings growth is in the hands of cable operators, and investments in distributed network architecture must begin for Teleste’s earnings growth train to get on new tracks. Also, the profitability of the problematic service business should not fall back into the red from its current zero level.
The stock has clear upside potential in the coming years if operators’ investment taps open and Teleste succeeds in this new generation of technology and its expansion into the USA. On the flip side, risks are also related to these same issues, and at this stage, visibility into these factors remains weak. A particular risk is that the start of investments is prolonged again, and the realization of the company’s earnings growth is pushed further into the future.
What is certain is that the start of investments in distributed architecture is closer today than it was in connection with the previous comprehensive report (12/2018), when it felt like investments were just around the corner. In this thread, we will follow and eagerly await when the distributed architecture technology cycle truly begins! With the right timing, from a risk/reward perspective, Teleste’s stock could offer an excellent opportunity to jump on board if and when operators’ investment taps open.
Even without the coronavirus, Teleste has been a “continuous setback” for years. Problems in its own operations, problems with the timing of customer investments, problems with THIEVES… Because of these, confidence in Teleste is limited to what they can demonstrate. I haven’t really grasped why there’s always something wrong there, and what it would take to fix it.
I owned shares, I recall, from 2016 onwards, first experiencing a cheerful upward trend, and then year after year, quarterly report after quarterly report, bland news. Fortunately, I haven’t been caught in these latest declines, although I watched for an uncommonly long time. Now, that development has certainly been hammered into the share price, but will it become blissful if and when investments begin? Or does the company have internal weaknesses otherwise?
Could this be more valuable if it were broken down (Piltkottuna - an unclear reference, possibly to a spin-off or similar financial restructuring)?
Let’s revive the Teleste thread after the Q1 results, especially now that the company is making big strategic moves! Referring to my opening post in the thread, we cautiously began to anticipate a cycle turn next year, with comments in the morning report: Teleste: Terävämmällä profiililla kohti teknologiasyklin taitetta - Inderes
The news of divesting from the German service business now removes one significant factor that has overshadowed earnings development in the coming years. Near-term earnings growth is now largely dependent on the launch of investments in distributed architecture. It is still uncertain how strong a position Teleste will gain in the new technology, but an investor anticipating a cycle turn may already dare to start cautious purchases at the current valuation.
In the big picture, this is unlikely to have a significant impact on Teleste, as Vecima is a relatively small player in the cable market. However, the companies will surely increasingly face each other in competition as Teleste is currently expanding into the North American market. In Vecima’s annual report, the company has also listed Teleste as its competitor:
The biggest question for Teleste’s US conquest is how the company will fare in competition with larger players (e.g., Commscope, Cisco, Casa, and Harmonic). We should start to get visibility into this starting next year, when investments in distributed architecture are finally expected to begin.
I’ve been on board for about 11 years, and we’re hovering around the original purchase prices, with small additions and sales made intermittently. It’s one of the smallest holdings in my portfolio, and at one point, I could have exited with decent profits. I used to think this would stay in my portfolio forever, the only one I was prepared to think that way about, but the company’s management has gone from one disappointment to another in recent years, so I seriously need to re-evaluate my own values. I can’t even justify to myself anymore why I keep it in my portfolio.
I start seeing red when we talk about a technology cycle turning point or, rather, the market entry of a new generation of technology.
We’ve already seen with Nokia how rocky the 5G road has been…
New technology always brings new worries on top of the old ones…
Teleste’s stock price is likely cheap now (costs the same per share as Nokia), but when could this clearly be more?
How many would, for example, exchange 5000 units of Nokia for the same bundle of Teleste?
OP lowers Teleste’s recommendation to Reduce (previously Add). The new target price is 4.00 euros (previously 4.50), while Inderes has it at Add and 4.50.
Now, just get more from Teleste; the stock is at least reasonably priced right now.
Yes, Teleste will rise from this, and there are parties among the owners that will ensure a positive turnaround.
I read through the report, and it’s like reading a similar Nokia report; a turnaround should happen, but will it… maybe then.
At Teleste, the 8 largest owners hold the majority, while others just ride along…
I read the Q2 report more carefully now, and every single line has a big minus.
I wonder why there are owners with Sampo (a Finnish financial group) background here… Mandatum, Stadigh, Lapveteläinen, etc.
Perhaps they intended to sell to Nokia at a good price, but now Nokia has sold off its own cable operations.
Aren’t Teleste and Rinnevaara severely underperforming?
Teleste’s problem of poor profitability is improving, so it was a plus that money also came in, and there was no need to shut down unprofitable business and write off the entire goodwill as a loss.
In this thread, we will follow and eagerly await when the distributed architecture technology cycle truly begins! With the right timing, from a risk/reward perspective, Teleste’s stock could offer an excellent opportunity to jump on board if and when operators’ investment taps open.
