NEW YORK (TheStreet) -- NII Holdings (NIHD) - Get NII Holdings Inc Report was plummeting 49.9% to $1.29 Friday after posting a larger-than-expected loss in its fourth quarter, and news that the telecommunications company will have to find ways to fund itself through 2015.
The company posted a net loss of $4.33 a share for the fourth quarter, $2.48 a share worse than the Capital IQ Consensus Estimate of a loss of $1.85 a share. Revenue fell 21.8% from the year-ago quarter to $1.08 billion, in-line with analysts' estimates.
NII Holdings reported a net loss of 247,000 subscribers in the quarter due to difficulties in Mexico and a change in its deactivation policy for inactive prepaid subscribers. The new deactivation policy resulted in a lot of subscriber deactivations, especially in Mexico where the company reported a net loss of 390,000 subscribers.
The company said that average monthly revenue per user (ARPU) was $34 for 2013, down from $42 in 2012.
With recent weak performance NII Holdings said it has adequate funding for 2014, but will have to find a way to fund its business in 2015 and beyond. The company said it will have to "significantly improve its operating performance and consider other options to enhance its liquidity position to meet its financial obligations," according to the earnings report.
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TheStreet Ratings team rates NII HOLDINGS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate NII HOLDINGS INC (NIHD) a SELL. This is driven by a number of negative factors, 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NII HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, NII HOLDINGS INC swung to a loss, reporting -$4.15 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 60.5% in earnings (-$6.66 versus -$4.15).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Wireless Telecommunication Services industry. The net income has significantly decreased by 263.9% when compared to the same quarter one year ago, falling from -$82.42 million to -$299.94 million.
- 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 Wireless Telecommunication Services industry and the overall market, NII HOLDINGS 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 -$62.41 million or 156.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 45.43%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 372.22% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: NIHD Ratings Report