Becker Drapkin Management Offloads Nearly 28% Of Its Stake In EMCORE Corporation (EMKR)

EMCORE has recently posted its financial results for the fiscal third quarter of 2015, which pushed the stock to a one year high of over $7 a share. The company reported consolidated revenue of $21.2 million, marking an increase of 11.2% from the previous quarter. EMCORE also managed to improve its consolidation gross margin, which came to 36.3% from the 33.5% reported a quarter ago. At the same time, the company posted non-GAAP income from continuing operations of $1.3 million, which also represented an increase of $1.3 million from the preceding quarter. Let’s not forget to mention that the management of EMCORE expects to deliver an even higher revenue figure for the fourth quarter, anticipated to be in the range of $22-$24 million.

A little while ago, some analysts at Northland Capital, a boutique investment banking firm, initiated coverage on EMCORE by assigning an “Outperform” rating and a target price of $9 on its stock. Hence, this implies that there is still potential upside of 23% from the current price of $7.28 per share. In the meantime, EMCORE completed a “Dutch auction” tender offer and purchased 6.9 million shares of its common stock at a purchase price of $6.55 per share, which might suggest that the management believes the shares of the company are still undervalued. Following the completion of the tender offer, the company disbursed approximately $45 million of its cash.

To sum up, the sell-off of 883,611 shares completed by Becker Drapkin Management does not suggest that there is no more upside for EMCORE or that the activist has necessarily turned bearish on his investment. Analysts at Northland Capital believe that there is more upside for the stock, so we advise continuing to monitor EMCORE in the upcoming months. Alan Fournier’s Pennant Capital Management is among the largest shareholders in EMCORE Corporation (NASDAQ:EMKR), holding an equity stake of 732,282 shares as of June 30.

Disclosure: None