Why Novatel Wireless (NVTL) Is Plummeting Today

NEW YORK (TheStreet) -- Novatel Wireless (NVTL) was plummeting 24.2% to $2.16 after missing analysts' estimates for earnings and revenue in the fourth quarter and posting a first-quarter guidance that falls below estimates.

For the fourth quarter Novatel posted a loss of 16 cents a share, missing analysts' estimates of a loss of8 cents a share by 8 cents. Revenue fell 7.6% from the year-ago quarter to $65.33 million. Analysts surveyed by Thomson Reuters expected revenue of $73.51 million.

Looking to the first quarter of 2014, the company expects revenue of between $50 million and $54 million, while analysts expect $75 million in revenue for the quarter. The company expects a loss of between 22 cents a share and 15 cents a share, compared to analysts' estimates of a loss of 7 cents a share for the quarter.

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TheStreet Ratings team rates NOVATEL WIRELESS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate NOVATEL WIRELESS INC (NVTL) a SELL. This is driven by multiple 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 weak operating cash flow and poor profit margins."

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

  • Net operating cash flow has significantly decreased to -$10.68 million or 1828.64% 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 NOVATEL WIRELESS INC is rather low; currently it is at 24.25%. Regardless of NVTL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NVTL's net profit margin of -5.49% significantly underperformed when compared to the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, NOVATEL WIRELESS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • NOVATEL WIRELESS 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, NOVATEL WIRELESS INC reported poor results of -$2.73 versus -$0.78 in the prior year. This year, the market expects an improvement in earnings (-$0.54 versus -$2.73).
  • You can view the full analysis from the report here: NVTL 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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