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Why Smith Micro Software (SMSI) Stock Plummeted to a One-Year Low Today

Stocks in this article: SMSI

NEW YORK (TheStreet) -- Smith Micro Software  (SMSI) plummeted to a one-year low of 66 cents on Friday after the tech company reported first-quarter results that came up short of analysts' expectations.

The company reported a loss of 14 cents a share, which was worse than analysts' consensus estimate of a loss of 5 cents a share. Revenue totaled $8.45 million, which was well short of the consensus estimate of $9.79 million.

"While we typically see a drop in revenue from the fourth quarter to the first quarter each year due to seasonality in our productivity and graphics business, this year's decline was more strongly felt since, as expected, the 19% customer in Q4 did not contribute any revenue to Q1," said CEO William Smith in a statement. "While we were hopeful that we could achieve profitability based on our previous restructure, a significant potential deal that didn't materialize and uncertainty regarding the timing of future revenues have resulted in the need for additional cost cutting measures. Therefore, we are taking immediate steps to further lower our cost structure by approximately $2 million per quarter."

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The stock was down 45.64% to 81 cents at 2:45 p.m.

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Separately, TheStreet Ratings team rates SMITH MICRO SOFTWARE INC as a "sell" with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SMITH MICRO SOFTWARE INC (SMSI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SMITH MICRO SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$3.21 million or 161.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for SMITH MICRO SOFTWARE INC is currently very high, coming in at 87.55%. Regardless of SMSI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SMSI's net profit margin of -12.68% significantly underperformed when compared to the industry average.
  • SMSI, with its decline in revenue, slightly underperformed the industry average of 5.7%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SMITH MICRO SOFTWARE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SMITH MICRO SOFTWARE INC reported poor results of -$0.75 versus -$0.71 in the prior year. This year, the market expects an improvement in earnings (-$0.07 versus -$0.75).
  • You can view the full analysis from the report here: SMSI Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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