Inseego INSG shares have lost 24% in the past month, underperforming the Zacks Computer & Technology sector’s return of 3.3%.

The underperformance can be attributed to INSG’s tepid fourth-quarter 2024 guidance. The current quarter faces tough sequential comparison due to record revenues and strong adjusted EBITDA in the third quarter of 2024.

The fourth quarter of 2024 is a seasonally weak quarter. Product revenues are expected to suffer from the end of a promotion at a North American carrier customer and some inventory management focus on another carrier customer.

Inseego expects total revenues from continuing operations to be between $43 million and $47 million. Adjusted EBITDA from continuing operations is expected to be between $3 million and $4 million.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $45.57 million, indicating a year-over-year rise of 6.59%.

The consensus mark for earnings is pegged at 2 cents per share, down 8 cents per share in the past 30 days. However, this metric indicates a year-over-year surge of 102.25%.

INSG’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and missed in the remaining two, the average negative surprise being 50.84%.

Strong Portfolio to Boost INSG’s Prospects

Despite the near-term sluggish outlook, Inseego’s strong portfolio has been a major growth driver. In the past 12-months, INSG’s shares have surged 398.8%, outperforming the Zacks Internet - Software industry and peers, including Meta Platforms META, Aspen Technology AZPN and PagerDuty PD.

Over the same time frame, shares of Meta Platforms and Aspen Technology have gained 93.4% and 29.2%, respectively. The industry has returned 53.8%. PagerDuty’s shares have lost 1.7%.

INSG’s growth has been supported by robust sales of carrier mobile hotspot products through MiFi promotions and an increase in SaaS subscriptions, driven by contract renewals.

Inseego has expanded its product portfolio by launching the multi-carrier-certified 5G indoor router, FX3110, as part of the Inseego Ignite channel program. 

The company introduced its first MiFi device, specifically tailored for the Inseego Ignite channel program, compatible with all Tier 1 operators in North America. These developments emphasize Inseego's focus on enhancing connectivity solutions and driving adoption across diverse customer segments.

Inseego's emphasis on its high-margin SaaS management platform and the expansion of its 5G wireless connectivity solutions position it to capitalize on growth in emerging and cutting-edge technologies. These strategic focuses align with market demands for scalable, innovative and future-focused solutions.

Inseego is advancing its product roadmap, exploring new growth opportunities and focusing on revenue diversification. The company is enhancing multi-carrier products to target a broader channel ecosystem while expanding its business with major U.S. carriers. This strategy aims to strengthen its market position and drive growth across various sectors.

Reduced Debt Aids INSG’s Capital Structure

INSG has significantly reduced its long-term senior debt from more than $160 million in the year-ago period to an estimated $41 million in the near term, thereby improving its capital structure. This move will lower annual interest expense from $5 million to $3.5-$3.7 million.

Inseego recently completed the sale of its global telematics business for $52 million in cash to Ctrack Holdings, a portfolio company of Convergence Partners. This sale will enable Inseego to concentrate on its core 5G business and provide cash for recapitalization and debt reduction. 

A portion of the proceeds will be used to fully repay the remaining $6 million balance of a loan from South Ocean Funding, LLC, under an agreement signed in June 2024.

INSG’s Zacks Rank

Despite a strong portfolio and reduced debt level, Inseego’s near-term growth prospects are dull.

INSG currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable entry point to accumulate the stock. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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