Regular readers will recall that we entered a position in Novatel Wireless a couple of days ago. The reason for staking out a position in Novatel was due to the introduction of MiFi. We saw that the product was hot, and we expected it to push earnings higher.
For the third quarter of the year, that's exactly what happened. "Our 12% sequential revenue growth and significant margin improvement was primarily driven by strong demand for our industry-leading MiFi Intelligent Mobile Hotspot platforms, as well as strong core product sales in North America," Peter Leparulo, chairman and CEO of Novatel Wireless, said. Revenues increased to $94.3 million, up from $78.4 million in the third quarter of 2008 and $84.1 million in the second quarter of 2009. Earnings were also up to $6.2 million from a loss of $1 million in the thrid quarter of 2008 and a loss of $800,000 in the second quarter of 2009. That works out to earnings of $0.20 a share for the third quarter and a loss of $0.03 per share for the third quarter of 2008 and second quarter of 2009.
Revenues exceeded Wall Street expectations, which had pegged third quarter revenues at $92.6 million. Earnings also exceeded projections, which were for earnings of $0.10 per share.
But the stock got pounded despite these impressive results. Why?
Because of Novatel's guidance for the fourth quarter. "Currently, we expect fourth quarter MiFi sales to be similar to third quarter levels as improving sell through catches up to initial stocking orders," Leparulo said. The company released projected revenue figures of $85-95 million, with earnings of $0.04 to $0.12 per share.
In order to meet Wall Street's expectations for the fourth quarter, Novatel will have to hit the higher number, and even that number is only a small increase from third quarter revenues and a decrease in earnings. Part of the third quarter earnings came from tax benefits. Even so, with the rollout of a new hot product, it's disappointing to see Novatel project flat revenues.
Novatel's stock got destroyed in after market trading, dropping by 18 percent to $10.
Still, we believe that MiFi will be a big product for Novatel, so we will eat our losses now, possibly add to our position, and sell covered calls to generate income while we wait for the pop from MiFi to really arrive.
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For the third quarter of the year, that's exactly what happened. "Our 12% sequential revenue growth and significant margin improvement was primarily driven by strong demand for our industry-leading MiFi Intelligent Mobile Hotspot platforms, as well as strong core product sales in North America," Peter Leparulo, chairman and CEO of Novatel Wireless, said. Revenues increased to $94.3 million, up from $78.4 million in the third quarter of 2008 and $84.1 million in the second quarter of 2009. Earnings were also up to $6.2 million from a loss of $1 million in the thrid quarter of 2008 and a loss of $800,000 in the second quarter of 2009. That works out to earnings of $0.20 a share for the third quarter and a loss of $0.03 per share for the third quarter of 2008 and second quarter of 2009.
Revenues exceeded Wall Street expectations, which had pegged third quarter revenues at $92.6 million. Earnings also exceeded projections, which were for earnings of $0.10 per share.
But the stock got pounded despite these impressive results. Why?
Because of Novatel's guidance for the fourth quarter. "Currently, we expect fourth quarter MiFi sales to be similar to third quarter levels as improving sell through catches up to initial stocking orders," Leparulo said. The company released projected revenue figures of $85-95 million, with earnings of $0.04 to $0.12 per share.
In order to meet Wall Street's expectations for the fourth quarter, Novatel will have to hit the higher number, and even that number is only a small increase from third quarter revenues and a decrease in earnings. Part of the third quarter earnings came from tax benefits. Even so, with the rollout of a new hot product, it's disappointing to see Novatel project flat revenues.
Novatel's stock got destroyed in after market trading, dropping by 18 percent to $10.
Still, we believe that MiFi will be a big product for Novatel, so we will eat our losses now, possibly add to our position, and sell covered calls to generate income while we wait for the pop from MiFi to really arrive.
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