Investment houses worldwide came out in force against broadband wireless access solutions company, the
(Nasdaq:NTRO) on Tuesday, after it issued another profit warning on Monday, its second within three months.
In a report on Netro published today, investment firm
titled the document: "Another quarter, another profit warning." Netro's previous profit warning was issued just before it released its fourth quarter results.
But Netro's profit warning yesterday caught Merrill Lynch's analysts napping. While its analysts had expected revenues of $16 million in the firm's first quarter, Netro yesterday announced that it expected sales of just $8.5 million.
The investment house says it is greatly concerned over the uncertainty surrounding Netro's deal with
(NYSE:LU) , which is itself experiencing a prolonged downturn, and is reducing its purchases from Netro. Lucent's purchases are expected to comprise just 50% of Netro's first quarter sales; that's compared with 85% of Netro's sales during its fourth quarter. Analysts are quickly lowering their forecasts, but point out that the risks facing Netro could lead them to further reduce their projections in the near future.
Analysts Michal Ching and Tal Liani project that Netro's second quarter revenues will reach $10 million, with an estimated loss per share of 50 cents for the quarter; that's compared with a loss per share of 39 cents in the previous quarter. But they say that Netro's ability to meet even these reduced forecasts depends greatly on regional developments, as well as an improvement in the Point to Multipoint (PTM) market in which it is active. Merrill Lynch has given the firm's share a Long-Term Buy recommendation.
Robertson Stephens projects 46 cent loss per share in 2001
"We have no way of forecasting Netro's results for 2002 in light of the firm's poor expectations," said
on Tuesday. Analyst Paul Silberstein and Elaine Segal say that although Netro is being traded at a market cap of less than $350 million, and has a cash burn rate of between $5 million to $15 million per quarter, they will not change their recommendation to a Buy. Instead, the analysts are lowering their forecasts for the company in 2001.
Robertson's analysts predict that Netro's sales will now only reach $32 million, as compared with their earlier forecast of $85 million for 2001. They predict a loss per share of 46 cents, instead of their previous prediction of a 39 cent loss per share. It's hard to believe that just three months ago, Robertson had forecast a 17 cent profit per share for 2001.
Ofek Partners not hopeful
Ofek The New World
is advising its customers: "Don't argue with the market." Its analysts believe that the market has already discounted Netro's shares with the expectation that the firm will only show losses in the next several quarters, especially in light of Lucent's sales slowdown, as well as the economic fall-off facing Netro's European customers. Its analysts say they agree with the market's discounted price for Netro.
They also predict a 10 cent loss per share for the company in its first quarter of 2001, before all of its write-offs. They point out that only yesterday Netro announced that it expects "Worse losses than forecast by any of the analysts," which explains why Ofek's analysts are so circumspect about the share.
First Union: Why not buy back shares?
's (NYSE:FTU) sales forecast for Netro is considerably higher than that of Robertson Stephens, but even they find it hard to be optimistic about the firm. First Union's analysts have no doubt about the core of Netro's problem, which they say is Lucent. "First quarter results show that Netro has relied too heavily on just one client," says a First Union report.
Its analysts ask why Netro hasn't utilized any of its substantial cash reserves to buy back some of its shares. Meanwhile, First Union has lowered its forecast for the company's revenues in 2001, predicting it will show an income of between $67.8 million to $89.1 million. They predict a loss per share of 54 cents in 2001, as compared to an earlier forecast of a loss per share of 43 cents.
Oscar Gruss: Netro found it hard to build new markets
investment house prefers to wait until Netro publishes its results on April 19, 2001, before deciding on a new forecast. Its analysts agree that Netro has serious marketing problems, which will be hard to solve during the current economic downturn.
But Oscar Gruss is the only investment house to lower its recommendation from an Outperform to a Hold. Here too, they believe that the demise of the Netro-Lucent connection is unfortunate, and point out that given the current circumstances, it will be hard for Netro to build new markets for itself.