NASDAQ Grants DragonWave Request For Continued Listing, Shares Up Nearly 30% After Hours

DragonWave, Inc.(USA) (NASDAQ: DRWI), a global supplier of packet microwave radio systems used in access and mobile networks, shares are up over 25%, as of 5:30 PM ET, after the company announced that the Nasdaq Hearings Panel granted DragonWave’s request for continued listing on Nasdaq. Now, this news comes after DragonWave closed up over 70% today, due to an announcement of an award of a product supply and installation services contract last night.
Here’s a look at DRWI on the daily chart, as of the close today:

DragonWave

Source: TradingView

Let’s get right into the news.

DragonWave Receives Positive Nasdaq Listing Determination

During the after hours session, DragonWave announced it was notified, yesterday, that Nasdaq Hearings Panel granted its request for continued listing on Nasdaq. That in mind, DragonWave’s continued listing on Nasdaq is subject to its achievement of specified milestones, which ultimately includes its compliance with the $2.5M shareholders’ equity requirement by no later than October 17, 2017. This was the primary catalyst that sent shares higher by over 25% during the after hours. However, this wasn’t the only positive catalyst the company had.

DRWI Awarded Product and Services Contract

DragonWave announced last night that it was awarded a product supply and installation services contract from SmartSky Networks, a 4G LTE inflight service provider based in North America. SmartSky is expected to deploy DragonWave’s Harmony Enhanced and Harmony Enhanced MC products in order to provide high-capacity backhaul for the company’s ground to air 4G LTE network. The reason for SmartSky’s selection of Harmony Enhanced MC was due to its high capacity delivered through its 2048QAM and dual channel capabilities. Not only that, but the high system gain of this product is ideal for SmartSky’s long path lengths.

According to SmartSky Networks Vice President of Services and Architecture Dave Claassen, “The DragonWave Harmony Enhanced MC product solution offers our desired capacity requirements for SmartSky…Harmony Enhanced MC delivers simple installation, operation and sophisticated remote management, so we are thrilled to partner with them to further enhance SmartSky’s capabilities.”

DragonWave President and CEO Peter Allen stated, “DragonWave is excited to be working with SmartSky on its innovative high capacity and low latency inflight offering. This application is ideally suited for Harmony Enhanced MC…We are also proud to be delivering engineering and installation services in support of this network.”

Now that we know the catalysts that sent DRWI shares up significantly today, let’s move on to some key statistics.

What You Need to Know About DragonWave

  • DragonWave received positive Nasdaq listing determination after the close today, and shares were up over 25%, as of 5:30 PM ET.
  • DRWI announced it was awarded a product supply and installation services contract, which was the primary catalyst that sent the stock up over 70% during today’s trading session.
  • DragonWave had 7.30M shares outstanding, 3.58M shares floating and a short interest of 11.31%, as of May 15, 2017.
  • DragonWave has a trailing 12-month price-to-sales ratio of 0.1, while the communication equipment industry average was 1.7. Now, the stock has been operating at a loss, and consequently, it does not have a price-to-earnings ratio, while the industry average was 28.6.
  • As of the close today, DRWI was up over 15% in a one-month period, but the stock was down 17.78% over the past three months.

Bull Case

DragonWave had back to back positive catalysts, which sent the stock higher by over 70% during the normal trading session, and over 25% during the after hours session, today. That in mind, some traders may see this as a momentum play, and since the stock has a low float, shares could potentially rise more, due to the supply and demand aspects of low float stocks. Moreover, the stock is near the low-end of its 52-week range, and some traders might be thinking the stock could catch a bounce after these developments.

Bear Case

Now, there are two sides to every trade. Some traders might be bearish and see this as a potential contrarian, or mean reversion trade. Since the stock closed up over 70%, and was up over 25% during the post market today, some traders might view this move as extended and believe some market participants will be taking profits tomorrow, which could cause the stock to pull back significantly, due to the stock’s low float. Moreover, some traders might be betting that DRWI might not meet the listing requirements by the deadline, which would cause the stock to sell off, if and when that occurs.

Final Thoughts

DRWI closed up significantly higher today, and as of 5:35 PM ET, it’s trading up nearly 30% due to the news surrounding the company’s positive Nasdaq listing determination. That said, there are two sides to every story, and there are some reasons why traders might look to get long, as well as short the stock.

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