Why Smith Micro Software (SMSI) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Smith Micro Software  (SMSI) are down -18.40% to 87 cents in midday trading today.

The tech company issued a statement in which said it is not involved in developing a future smartphone with Amazon (AMZN).

Smith Micro Software also said it is not aware of any material undisclosed developments that would account for the unusual trading activity in the company's stock.  

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Following the market rumors, shares had soared about 36% yesterday, on speculation it was developing 3D technology for the device.

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 some concerns, 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 generally disappointing historical performance in the stock itself."

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.
  • SMSI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.17%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • The revenue fell significantly faster than the industry average of 7.5%. Since the same quarter one year prior, revenues fell by 27.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for SMITH MICRO SOFTWARE INC is currently very high, coming in at 71.36%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SMSI's net profit margin of -61.15% significantly underperformed when compared to the industry average.
  • SMITH MICRO SOFTWARE INC has improved earnings per share by 17.6% 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 (-$0.12 versus -$0.75).
  • You can view the full analysis from the report here: SMSI Ratings Report
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