Novatel Q4 Loss Wider than Expected; Shares Dip - Analyst Blog


Novatel Wireless Inc. ( NVTL ) posted dismal financial results for the fourth quarter of 2013. On a GAAP basis, net loss in the reported quarter was $21.3 million or a loss of 63 cents per share compared with net loss of $14.9 million or a loss of 45 cents in the year-ago quarter. However, adjusted loss per share of 18 cents is wider than the Zacks Consensus Estimate of a loss of 15 cents per share.

Increased competition, higher operating expenses and a slashed outlook for the upcoming quarter have hurt its stock price. Following the result declaration, stock price fell by 53 cents or 18.6% to $2.32, during the aftermarket trade.

Total revenue in the reported quarter stood at $65.3 million, down 7.6% year over year and also below the Zacks Consensus Estimate of $75 million. Segment wise, Mobile Computing Products generated revenues of $57 million, down 10.8% from the year-ago quarter. M2M Products and Solutions revenues were $8.3 million, up 22.1% year over year.

Quarterly gross margin was 18.4% compared with 19.2% in the year-ago quarter. Operating expenses in the reported quarter were $33.5 million against $28.2 million in the year-earlier quarter. Quarterly operating loss was $21.4 million versus $14.6 million in the prior-year quarter.

During the fourth quarter of 2013, Novatel consumed $22.3 million of cash from operations compared with $7 million in the year-ago quarter. Free cash flow was a negative $22.4 million against $7.6 million in the prior-year quarter. At the end of the fourth quarter of 2013, Novatel had approximately $19.5 million in cash and marketable securities on its balance sheet compared with $54.1 million at the end of 2012. The balance sheet of Novatel remains debt free.

Financial outlook

For the first quarter of 2014, management expects revenues to be within $50-$54 million while Mobile Computing and M2M revenues are anticipated to be in the range of $39-$42 million and $11-$12 million, respectively. Non-GAAP gross margin is expected to be between 21% and 22%. Non-GAAP earnings per share are anticipated in the band of a loss of 22 to 15 cents per share.

Our Take

Novatel supplies its LTE-based MiFi devices to the top three carriers in the U.S., namely, Verizon Communication Inc. ( VZ ), AT&T, Inc. ( T ) and Sprint Corp. ( S ). In order to boost its top line, the company is continuously upgrading its software and launching innovative devices in an attempt to drive Mi-Fi usage.

However, the company is facing stiff competition from Asian manufacturers like ZTE and Huawei Technologies who provide reasonably-priced devices. Moreover, in recent times, most smartphones have in-built hotspot facilities, thus completely bypassing the need for a MiFi modem.

Currently, Novatel carries a Zacks Rank #3 (Hold).

NOVATEL WIRELES (NVTL): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

AT&T INC (T): Free Stock Analysis Report

VERIZON COMM (VZ): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: NVTL , S , T , VZ

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