Sequans Communications Stock Looks Interesting After 45% Drop
Paris, France-based Sequans Communications SA (NYSE:SQNS) is a beaten-down 5G stock that has great long-term growth potential.
Despite the fact that the supply and distribution chains haven’t yet recovered from the COVID-19 pandemic, Sequans Communications SA managed to report solid second-quarter results. That’s because the demand for 5G chips remains at record levels.
Eventually, the supply-chain constraints will alleviate and SQNS stock should rebound from its current depressed level.
Sequans Communications stock took a hit during the March 2020 stock market crash but rebounded quickly. Between March 2020 and February 2021, SQNS stock soared by 190%.
Since then, however, Sequans Communications stock has tumbled by approximately 45%.
That slide didn’t have anything to do with anything that Sequans Communications SA has done. Rather, it had to do with chip shortages undermining the entire semiconductor industry.
Despite that, the company managed to report excellent second-quarter results and an earnings beat.
Furthermore, Sequans Communications SA’s business pipeline is well over $600.0 million, and it’s working on nearly 100 design-win projects, 60 of which are advancing to revenue generation.
What we’re left with is a great 5G stock trading at unnecessarily depressed prices. As I said earlier, that dynamic should reverse once the supply-chain constraints abate.
Wall Street agrees. Of the analysts providing a 12-month share-price forecast for SQNS stock, their average price target is $11.30 and their high estimate is $16.50. This points to potential upside of 123% and 226%, respectively.
SQNS Stock Overview
Sequans Communications SA is a fabless developer of 4G and 5G chips and modules used in broadband and critical Internet of Things (IoT) markets in Asia, the U.S., the Middle East, and elsewhere.
The company provides a product portfolio for 5G/4G massive IoT applications featuring low power consumption, integrated functionalities, and global deployment capability.
Sequans Communications SA also offers a product portfolio for 5G/4G broadband and critical IoT applications that are optimized for low-cost residential, enterprise, and industrial applications.
The company has a global reach and customer base that has included numerous major wireless operators, such as AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), Cisco Systems Inc (NASDAQ:CSCO), Lockheed Martin Corporation (NYSE:LMT), and Motorola Solutions Inc (NYSE:MSI).
Q2 Earnings Beat & Record Design Wins
Sequans Communications announced that its revenue for the second quarter ended June 30 increased by six percent year-over-year and five percent sequentially to $12.9 million. (Source: “Sequans Communications Announces Second Quarter 2021 Financial Results,” Sequans Communications SA, August 3, 2021.)
The company reported a second-quarter net loss of $1.3 million, or $0.04 per share. That was far better than Wall Street’s projections of a loss of $0.17 per share.
In the second quarter of 2020, Sequans Communications SA reported a net loss of $19.0 million, or $0.70 per share, and in the first quarter of 2021, it reported a net loss of $11.4 million, or $0.33 per share.
Management said the results were attributable to “massive IoT” chip growth, which increased 14% sequentially and 120% year-over-year.
“Our business pipeline is well over $600 million, with the design win portion increasing by 18% to $280 million since last quarter,” said Georges Karam, Sequans Communications SA’s CEO. (Source: Ibid.)
We are now working on nearly 100 design-win projects, with over 40 projects now in the production phase, primarily in Massive IoT applications along with several Broadband IoT products. The remaining 60 design-wins are advancing to revenue generation as customer projects move to manufacturing and 15 of them have placed pre-production and production orders in the second quarter.
Sequans Communications stock is a great undervalued 5G stock that is being held back, in part, by supply chain roadblocks. Despite this, the company was able to report solid Q2 revenue growth, an earnings beat, and record design wins.
Given the robust demand that Sequans Communications SA is experiencing, management believes the company’s overall growth projections are intact. They expect the company to achieve its “medium and longer-term growth objectives as industry-wide supply challenges subside.”