Sierra Wireless’ 4Q Sales Exceed Expectations; Street Sees 28% Upside

Sierra Wireless delivered better-than-expected sales in the fourth quarter as the IoT solutions provider saw an increase in recurring and other services revenue.  This was the third consecutive quarter of sequential revenue growth for the company.

That said, Sierra Wireless (SWIR) posted a net loss per share (EPS) of $0.31 during the fourth quarter, which was higher than analysts’ expectations of a net loss per share of $0.26.

Revenue decreased 3.7% year-on-year to $120.48 million, topping analysts’ estimates of $116.23 million. Driven by changes in product and customer mix in the company’s embedded broadband and IoT solutions segment, gross margin rose to 36% from 35.8% in the year-ago period.

For fiscal 2020, thanks to lower mobile computing module sales and pandemic-led component supply constraints, the company generated sales of $448.6 million , reflecting a year-on-year decrease of 18%. Diluted loss per share came in at $1.93, versus a net loss per share of $2.06 in the comparable year-ago period.

Sierra Wireless President and CEO Kent Thexton said, “We are winning in the market with our Solutions offering and our Recurring and other services revenue is now at 27.1% of total revenue.”

Looking ahead to 1Q, Sierra Wireless guided for revenue of $109.9 million, in line with consensus. The company also noted that there is strong demand for its products and services in 1Q. It has secured orders and recurring revenue that is about 15% higher than the Street estimate, but current supply constraints reduce its ability to fully address this demand. (See Sierra Wireless stock analysis on TipRanks)

Yesterday, Canaccord Genuity analyst Michael Walkley raised the price target to $30 (72% upside potential) from $24 and reiterated a Buy rating. Walkley said, “Given the company’s continued investments in core growth areas we believe it is well positioned to benefit from IoT industry growth trends longer term.”

Turning to the rest of the Street, SWIR has a Moderate Buy consensus rating, based on 4 Buys, 1 Hold and 1 Sell. The average analyst price target of $22.25 implies about 28% upside potential from current levels.

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