Acacia Communications, Inc. - Buy Recommendation at $40.25 PT
The quiet period for the Acacia Communications, Inc. (Pending:ACIA) IPO is scheduled to expire on June 7th, 2016. The underwriters for the IPO will be able to release reports and to make their recommendations about the company and its stock beginning on June 8th, 2016.
Acacia Communications is a technology company focused on optical networking to improve communication and networking speeds. The company converts optical internet technology to technology that is silicon-based through a process it calls siliconization. After the expiration of the company's quiet period, the share prices are likely to increase when the underwriters are allowed to release reports that will probably be very positive. The underwriters for the IPO include Goldman, Sachs & Co., Deutsche Bank Securities and BofA Merrill Lynch.
Strong early market performance
Acacia Communication's expected price range was set at $21 to $23 for its IPO on March 13. The company chose to price its shares at the high end. On March 13, it opened up by 29 percent, opening for trading at a price of $29 per share. During that first day of trading, it ended up closing up by 35 percent at more than $30 per share for a market cap of above $1 billion. Since then, the stock has continued to be very strong. On June 2, 2016, it closed at $37.54 per share. Based in Maynard, Massachusetts, the company was founded in 2009.
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(Nasdaq.com)
Business overview: A cutting-edge fiber optics company
According to the company's SEC filings, Acacia Communications is a technology company that is working to transform networks by converting optical interconnect technology to silicon-based technology. The company works to improve the performance and speed of network communications while also reducing the costs. The company has developed modules that deliver speeds of up to 400 gigabytes per second and is developing modules that could transmit data at speeds of up to 1 terabyte per second.
Overview of executive management
Murugesan Shanmugaraj is the CEO and president of Acacia Communications. He has a background of more than 25 years working within the telecommunications industry. He previously served as the vice president of business development for Alcatel-Lucent USA's optical networking division. Mr. Shanmugaraj also founded Astral Point Communications, for which he also served as the company's CEO. Mr. Shanmugaraj completed his Bachelor of Engineering in communications and electronics at the National Institute of Technology and his Master of Science in computer and electrical engineering at the University of Iowa.
One of the founders and the company's Chief Technology Officer, Benny Mikklesen has a wealth of experience in optical transmission. He has held a variety of positions at Bell Laboratories and cofounded Mintera. He has a Ph.D. in electrical engineering that he completed at the Technical University of Denmark.
Competitors: Finisar Corporation, Ciena and others
Competitors of Acacia Communications include other companies in the semiconductor industry that are working to develop better fiber-optic interconnectivity. These competitors include such companies as Finisar Corporation (NASDAQ:FNSR), Ciena (NYSE:CIEN), Lumentum Operations (NASDAQ:LITE) and others.
Conclusion: Buy in advance of the quiet period expiration for ACIA
Acacia Communications has had eye-popping growth during its short time on the market. With a price target of $38.75 (derived from years' of our firm's quiet period research), it still has plenty of room to grow. The company is backed by powerful and respected underwriters. Given its extremely strong early market performance and solid financial history, it is likely that the share prices will increase even more when the underwriters' reports are released. We recommend investors buy shares of Acacia before the expiration of its quiet period on June 7, 2016.
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