What does Netcomm Wireless do?
Netcomm Wireless [ASX:AMP] provides a range of connectivity equipment to the telecommunications industry. For example, NTC makes hardware to connect fibre or cable lines from the exchange or telecommunication pits to the home.
What’s happening to NTC’s share price?
NTC’s share price jumped nearly 9% today, after the company announced a $28 million deal to supply the National Broadband Network (NBN) with ‘4-port distribution units’.
The NBN is a ‘fibre to the curb’ network, which means the telecommunication line doesn’t run into individual homes, but rather to the ‘curb’, which is really a name for various points in the neighbourhood. NTC’s equipment is then deployed at these points to help connect the NBN to the home.
As this is an ‘initial order’ the market clearly expects more good news to come.
What now for NTC?
The interesting thing about this story is that the market already knew about it. NTC made the announcement in November 2016. And as you can see in the chart below, the initial response was positive.
But the share price started falling again soon after.
Telco stocks have been out of favour lately, as the NBN looks like eating into the profits of many providers. But NTC isn’t really impacted by the competition from the NBN. In fact, as today’s announcement shows, its making money from the NBN.
This should be good news for the stock. But the share price is in a well-defined downtrend. For that reason I’d stay away. Today’s share price rise may be the start of a turnaround, but it’s too early to tell.
In short, NTC’s story is a good one, but the chart is sending a less positive message.
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Editor, Money Morning