We are downgrading our recommendation on
Novatel Wireless Inc.
) to Neutral, following its mixed financial results in the first
quarter of 2012. Although revenue surpassed the Zacks Consensus
Estimate, earnings per share were way below it. We believe the
company's overall financial condition will improve in the rest of
2012, driven by huge market traction of Novatel's 4G products,
especially the 4G MiFi intelligent hotspots and Expedite embedded
The company is upgrading its existing customers to its
innovative 4G LTE product suite. Diversification into
machine-to-machine intelligent asset management solutions and newly
developed insurance telematics and fleet management products will
further boost Novatel's future growth. Despite these positives, we
do not expect the company to achieve profitability any time soon.
Precipitous losses may jeopardize the company's healthy balance
sheet going forward.
Novatel first introduced its first embedded LTE solution with
Verizon Wireless, which is a joint venture between
Verizon Communications Inc.
Vodafone Group plc.
). The Expedite embedded-module suite incorporates super-fast 4G
data connectivity with tablets and laptops. Earlier, Novatel
introduced its first 4G MiFi mobile intelligent hotspots with
Verizon. MiFi 4510L provides backward compatibility with Verizon's
3G networks. At present, Novatel is the only company, which can
offer a full suite of LTE products across all forms of wireless
data access medium, viz., MiFi Intelligent mobile hotspots, Ovation
USB modems, and Expedite embedded modules.
From a financial perspective, Novatel's balance sheet remains
firm, and capable of sustaining near-term expenses. At the end of
the first quarter of 2012, the company had more than $2.14 per
share of net cash & marketable securities. This strong cash
position will enable the company to diversify into several new
wireless verticals, especially in the high-speed 4G platforms.
NOVATEL WIRELES (NVTL): Free Stock Analysis
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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