Novatel Wireless (NVTL), maker of the MiFi hotspot, has failed to connect with investors this quarter. Two analysts cut their price targets on the stock after the company reported earnings yesterday, and today shares of Novatel are off about 20%. Yesterday Novatel reported a net loss of $38 million for the first quarter on revenue of $100.2 million, down from $109.8 million in the year-ago quarter. BMO Capital has a price target of $3.00 per share on Novatel and Canaccord Genuity has a price target of $2.50. Today shares are hovering just above $2.00 per share.
“The MiFi hotspot is doing fine but other pieces of their business just haven’t come together,” says Canaccord’s Michael Walkley. Walkley says Novatel missed a major opportunity when it lost its bid to acquire Cinterion, the leading vendor of M2M modules. Gemalto ended up buying Cinterion and Novatel instead bought Enfora, an M2M player with a much smaller market share. Yesterday Novatel said it is writing down the value of Enfora, which remains focused on 2G technology in a market that is moving rapidly to 3G and even 4G. “For anybody doing a deployment today, if they are not looking at 4G they are missing the boat,” says James Brehm, who runs the M2M practice at Compass Intelligence, a wireless industry consulting firm.
Sales of MiFi hotspots to Verizon Wireless account for more than half of Novatel’s sales, according to Walkley, and he sees the reliance on one customer as a liability for the company. “Eventually they can get some others,” says Walkley. “MiFi is doing quite well.” Novatel says it has shipped more than 3 million hotspots since 2009.
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