Cramer Trades the 'Mobile Internet Tsunami'
On Friday, Cramer highlighted an initial public offering that was largely overlooked. The deal was so poorly managed, he said it was practically the polar opposite of LinkedIn's IPO.
The "Mad Money" host was referring to Sequans Communications , a $300 million company based in Paris. Cramer said the semiconductor is integral to the next wave of the "mobile Internet tsunami" — that is, 4G networking. After all, wireless carriers are only beginning to role out their 4G networks, which are so fast that consumers can download a entire high-def movie in roughly three minutes.
There is a tremendous amount of growth in 4G networking, Cramer said. LTE, the 4G technology used by Verizon and T-Mobile, is in about 0.33 percent of all U.S. mobile lines. By 2014, however, roughly 20 percent of all mobile lines in the U.S. will use LTE. The 4G market overall is expected to grow at a 100 percent clip from last year through 2014, which means there's a lot of money to be made in 4G technology.
Sequans designs the chips that allow devices, like smartphones and other devices to use 4G networks. It's the leading provider of WiMax chips, which is the 4G standard for Sprint Nextel , among other carriers. Cramer compared it to Skyworks Solutions , one of his favorite speculative plays on the transition from 2G to 3G networks. Skyworks shares are up 520 percent since Cramer first recommended it back on December 12, 2008.
But if Sequans is so great, why was its IPO a "big fat failure?"
"Sequans had a broken IPO, but you see, it’s not a broken company," Cramer explained. "They just hired a bad lead underwriter [in] UBS. UBS did a lousy job of kindling interest in the deal."
When Sequans went public on April 19, it priced at $10 a share, much lower than the expected price range of $11 to $13. The stock then opened down big with shares at $7.95. While the stock has bounced back from those levels, it's still trading lower than many thought it would.
"Right now I think you’re getting an incredible opportunity to buy Sequans on the cheap because the brokerage houses that brought them public will soon initiate coverage on the stock," Cramer said. "The quiet period ends next week, which means we should expect a bunch of 'buy' ratings to come out on Sequans."
Once investors get wind of Sequans, Cramer thinks they'll find it very attractive. The company is growing like crazy and recently reported a strong quarter with earnings coming in at 7 cents a share and revenues rising 149 percent year-over-year. It also has a clean balance sheet and a strong management team, Cramer said.
What's the bottom line?
"The transition to 4G will be the next wave of the mobile Internet tsunami," Cramer said. "Sequans is a terrific, overlooked way to speculate on it."
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