We maintain our Neutral recommendation on
Novatel Wireless Inc.
). The company reported weak financial results for the third
quarter of 2012. Quarterly net earnings narrowly missed the Zacks
Consensus Estimate, however, the revenue significantly fell
below the same. The annualized downside in revenue was owing to
subdued performance in both its Mobile Broadband Device and
Embedded Solution segments. In the reported quarter, Novatel
incurred a goodwill and intangible asset impairment charge of
Importantly, management has provided a very lacklusture
guidance for the ensuing fourth quarter of 2012. We do not expect
Novatel to achieve profitability any time soon. Precipitous
losses may jeopardize its healthy balance sheet going forward.
Competitions from low-cost Asian manufacturers together with a
highly concentrated customer base are the other headwinds.
Nevertheless, the stock price is currently at its trough, which
may provide a cushion for further downslide.
Novatel is concentrating on three types of products: (1)
4G-enabled data transmission products (2) M2M intelligent asset
management products (3) Insurance telematics and fleet management
products. According to ABI Research, the number of global
insurance telematics users are expected to grow at a CAGR of 90%
to reach 89 million by 2017. This is a vast untapped market and
generates huge revenue potential for Novatel.
Novatel has launched its innovative touch screen MiFi 2
). The company is hopeful to launch this product with other
carriers in 2013. Recently, Verizon Wireless has launched
Novatel's MiFi 4620 with an expanded battery backup. Verizon
Wireless is a joint venture between
Verizon Communications Inc.
Vodafone Group plc.
). Novatel will introduce a second variant of MiFi with Verizon
Wireless either in the ensuing fourth quarter or the first
quarter of 2013 which will be more cost effective.
NOVATEL WIRELES (NVTL): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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