NVTL

[spiritgate]

Don't worry.  NVTL is too strong to take this hit very hard.  Besides, Motley Fool gives it an OUTPERFORM rating again.  http://www.fool.com/investing/high-growth/2007/07/25/this-just-in-upgrades-and-downgrades.aspx   This dip just gives us an opportunity to buy more!

[David Randolph]

I will hold all my stocks now. If I sell, I'll regret a month later. All these jitters are temporary. There is no reason for wireless modems to stop selling because some fellas go bankrupt on their homes. Americans should lighten up - stop buying termite infested ugly looking shacks and build some nice apartment homes where they can have people as friends, not rifles and handguns.

He he, I agree with you berloga

In the future everybody will want to have an high speed mobile internet connection. It has to do with freedom of movement and the "work from everywhere, at anytime" trend.

I'm going to take advantage of NVTL's sharp decline to buy its closest competitor, SWIR, which has been doing better than expected and went down 12.2% on Friday, due to analyst's downgrades and general market weakness.

NVTL was up 200% year to date for a good reason. That's the main trend. The recent 24% correction from the highs was a correction to the main movement, but the main movement will probably just continue, as fundamentals are supportive.

I'll keep holding NVTL.

[nexta]

That is probably what took NVTL down so much:
Netgear Inc. (NTGR): shares of Santa Clara, California based communication equipment maker plunged 23.61% to $28.89 per share after the company reporeted 38% profit cut to $6.1 million. The stock was the fifth leading decliner on Nasdaq with 9 million shares traded.

chart:
http://stockcharts.com/h-sc/ui

[la-onda]

fyi:
Forbes article:

Novatel Wireless: Overpriced And Undermanaged
Nikhil Hutheesing, Forbes Wireless Stock Watch 07.30.07, 1:20 PM ET

With the recent sell-off in the market, investors may be tempted to buy up shares in companies that saw their prices drop. The trick is to make sure that you are finding value and not just investing in companies that were overvalued and have now corrected.
Are you profiting from the move to wireless broadband and WiMax? Click here for a special report on six undervalued wireless companies set to soar.

One such company is San Diego, Calif.-based Novatel Wireless. Novatel is a maker of wireless modem PC cards and communications software. The company's stock has had a wild ride. Since 2004 it has ranged in price from about $5 to a high of $27. In June, I recommended that investors sell their shares at $25.15. Despite the recent sell-off, I still think that Novatel is overpriced. Part of the reason that the stock has had a good run is because many of the problems that had plagued Novatel one year ago are no longer issues.

Last year, Novatel suffered from a backlog of old inventory of 2.5G cards, which it had to write down, taking a $2.3 million charge. Plus, its PC card business was under pressure in Europe from competitors like Sierra Wireless and Option. Then there was the announcement that Intel and Nokia were teaming up to hit Novatel in its core business: providing embedded wireless connectivity technology to laptop manufacturers. Things improved. The announcement from Intel and Nokia turned out to be just that--an announcement. No products were ever announced, and the collaboration ended earlier this year. Besides that, Novatel's research and development efforts into embedded technologies is winning business for the company, and its products are being used by big companies such as Dell, Sony, Panasonic and Toshiba. PC card sales are also much stronger and an old product the company had seemingly written off--Ovation--has been rejuvenated and is selling well.

So why sell shares? One reason is looming competition. One big growth area for Novatel comes from the deployment of WiMax high-speed networks, which will soon be rolled out in the U.S. While the company stands to win orders, Sprint, which represented 38% of Novatel's sales in 2006 and is one of the earliest to build a WiMax network, named Samsung and ZTE as the partners that will provide the data cards and USB modems.

While it's possible that Novatel will also provide some products to Sprint, so far it has not been included in Sprint's initial list of vendors. Also, Novatel's biggest competitor, Sierra Wireless, is edging in on Novatel's market share, now selling some USB modems to Novatel's customers. The company has seen Novatel's success with its Ovation line of modems--an area that where it will likely become a competitor as well.

Novatel also has to contend with new players, such as Huawei, which continues to gain market share in the U.S. with its wireless cards and products. This increasingly competitive market could lead to pricing pressure. While Novatel certainly has an edge with the distribution channels and has the knowledge and the relationships to sell its products, other companies could break into this business.

In addition, there is a possibility that handset manufacturers will also enter the fray, becoming competitors to Novatel by offering PC cards directly or by using the handset as a modem tethered to a laptop with a cord. So far, that is not being done on a scale big enough to worry modem manufacturers like Novatel and Sierra Wireless.

While any pressure on the business will also hurt the stock, I'm concerned because investor expectations for Novatel are more lofty than ever, thanks to the better-than-expected earnings report last quarter and the company's rosy forecast for the second quarter. Given the growing competition, I think it will become increasingly difficult for Novatel to meet higher expectations, which will result in pressure on the stock.

I'm also less confident in this company because two of its most senior managers, Peter Leparulo, chief executive officer and Dan Halvorson, the company's chief financial officer, both resigned within a year of each other. These men are credited with turning Novatel Wireless around during the difficult times and giving the company renewed direction. Without them at the helm, there is more concern about Novatel's leadership. The CFO quitting it is almost never a good sign.

In my experience, a changing of the guard in management usually precedes a round of write-offs and restructuring charges. In this way, the new team depresses results immediately, which can be attributed to the old guard, so in a year, when earnings are more normalized, they look like heroes.

With the stock up 170% in six months, the fundamentals are no longer as compelling as they were when I previously added shares of the stock to the portfolio. Back in October 2004, when I first added shares, Novatel had a price-to-earnings ratio of 31 and, adjusted for its growth rate, a price-earnings-to-growth ratio of 1.09.

Fast forward to December 2006, when I doubled down my position--the company wasn't even profitable. But based on the changes taking place at Novatel, I told my readers that I expected the company to turn the corner and to earn 44 cents per share in 2007, adjusted for cash, giving it a 2007 estimated P/E ratio of 34--in line with its historical range. The company did become profitable--today the PE ratio is 60, far higher than my expectations and overvalued, in my opinion. It also exceeds Sierra Wireless' P/E ratio of 47.

Another worry: Short interest in the company's stock is growing. In mid-April, the company had a short interest of 5.9 million shares. One month later, in mid-May, that was up to 7.3 million shares, or about 24% of the stock's float. Novatel operates in a fast-growing segment of the wireless market, and its business has great opportunities ahead. But its just too expensive at current levels.


I am still holding NVTL with strong hands; chart:

[David Randolph]

Thanks for your great posts nexta and la-onda

Fast forward to December 2006, when I doubled down my position--the company wasn't even profitable. But based on the changes taking place at Novatel, I told my readers that I expected the company to turn the corner and to earn 44 cents per share in 2007, adjusted for cash, giving it a 2007 estimated P/E ratio of 34--in line with its historical range. The company did become profitable--today the PE ratio is 60, far higher than my expectations and overvalued, in my opinion. It also exceeds Sierra Wireless' P/E ratio of 47.

The only problem with this man's analysis is that NVTL is about to earn at least $1 per share in 2007, more than double what he was thinking.

According to the company's second quarter guidance, I would say the company already made $0.58 GAAP EPS in the first half of the year, so the article is complete non-sense (even though it has some valid information).

I'll keep holding NVTL.

[soxguy]

DJ Novatel Wireless Cut To Underweight At JP Morgan

.

  (END) Dow Jones Newswires

  July 31, 2007 05:47 ET (09:47 GMT)

  Copyright (c) 2007 Dow Jones & Company, Inc.- - 05 47 AM EDT 07-31-07       Not good .

[berloga]

These downgrades are a simple market manipulation. Those analysts are just waiting for their clients to get in before they upgrade the stock again. They figured buying at $29 was too high, hence the downgrades. I'll patiently wait this quarter through.

[stockhunter]

anyone buying some more just before earnings?

[David Randolph]

These downgrades are a simple market manipulation. Those analysts are just waiting for their clients to get in before they upgrade the stock again. They figured buying at $29 was too high, hence the downgrades. I'll patiently wait this quarter through.

I agree berloga, that seems to be the case.

Today it was JP Morgan that downgraded NVTL:

NVTL: JP Morgan Cuts to Underweight from Neutral; Analyst Notes

Their reason:

«Analyst Comments: Guidance from Sierra Wireless (SWIR) and Option Wireless suggest channel selling is peaking. The firm believes there is a risk of a slump in sales and margins, making shares fully valued at these levels.»

A risk of a slump in sales and margins? For mobile connection products?

I just don't see this happening. I believe mobile internet is just starting and it will be huge a couple of years from now.

I don't see anything wrong with SWIR's guidance, the company will grow revenues by roughly 100% from the year ago levels. Here's what SWIR's management said in Q2 earnings release:

«Looking forward, we expect that our rapid pace of new product introductions, strong channel position and expansion of our newly acquired M2M business will drive continued revenue growth and improving profitability in the second half of 2007."»

I'll continue holding NVTL, despite the short term weakness.

[bourbonstreet_crawdaddy]

Hi Gang:

Someone bought $10 Million (500k) shares of NVTL and 300k shares of SWIR right before 3pm today! I decided to pick up some more shares too.

Nothing has changed with these stocks at all over the past 2 weeks, except for the analysts comments, which we have seen are WAY off....

What a Tremendous Buying Opportunity here!!!!

Good Luck and Happy Trading

Bourbon 

[David Randolph]

Hi Gang:

Someone bought $10 Million (500k) shares of NVTL and 300k shares of SWIR right before 3pm today! I decided to pick up some more shares too.

Nothing has changed with these stocks at all over the past 2 weeks, except for the analysts comments, which we have seen are WAY off....

What a Tremendous Buying Opportunity here!!!!

Good Luck and Happy Trading

Bourbon 

I agree Bourbon

My take is NVTL is so good that a lot of influent people wanted to get in, but of course, because they have the power to shake weak hands, they took advantage of it and managed to get shares at a deep discount.

I don't remember paying anything to JP Morgan, for example, for advice on NVTL. And they're not JP Morgan by providing services for free. For the people that paid attention to their ridiculous research, there will be a price to pay, when they buy back their shares above $30.

This is my view of what is happening, but I can be wrong.

Anyway, NVTL is trading at about 1.5 times 2007 revenue, while it is growing revenues by about 100%. I don't think the revenue growth will stop, in fact, I think demand for the company's products is just starting to get traction. In a couple of years from now everybody will have mobile internet, instead of fixed internet, pretty much like the transition we've had from the fixed lines to the mobile phones.

The candlestick today was encouraging, despite the 3.2% fall.

I remain confident in NVTL's fundamentals (I wish they can expand net profit margin from the 8% level, that would increase its value a lot) and I expect the stock to close 2007 comfortably above $30.

[Garoh]

Hi Gang:

Someone bought $10 Million (500k) shares of NVTL and 300k shares of SWIR right before 3pm today! I decided to pick up some more shares too.

Nothing has changed with these stocks at all over the past 2 weeks, except for the analysts comments, which we have seen are WAY off....

What a Tremendous Buying Opportunity here!!!!

Good Luck and Happy Trading

Bourbon 

I agree Bourbon

My take is NVTL is so good that a lot of influent people wanted to get in, but of course, because they have the power to shake weak hands, they took advantage of it and managed to get shares at a deep discount.

I don't remember paying anything to JP Morgan, for example, for advice on NVTL. And they're not JP Morgan by providing services for free. For the people that paid attention to their ridiculous research, there will be a price to pay, when they buy back their shares above $30.

This is my view of what is happening, but I can be wrong.

Anyway, NVTL is trading at about 1.5 times 2007 revenue, while it is growing revenues by about 100%. I don't think the revenue growth will stop, in fact, I think demand for the company's products is just starting to get traction. In a couple of years from now everybody will have mobile internet, instead of fixed internet, pretty much like the transition we've had from the fixed lines to the mobile phones.

The candlestick today was encouraging, despite the 3.2% fall.

I remain confident in NVTL's fundamentals (I wish they can expand net profit margin from the 8% level, that would increase its value a lot) and I expect the stock to close 2007 comfortably above $30.

You'er definitely right David ...

Here in Kuwait more than 70% are using the mobile internet but the most popular aircards are Sierra's cards ..

Anyway .. I really expected NVTL to drop to at least $21.36 but it went further to $19.91 when it hit the Gap support today .. I knew this just when it broke the 25.62 but sometimes you can't imagine that a stronge stock can go down 30% in a week just because of a small downgrade 

for now I found out about an interesting thing .. look at the weekly chart below . are we going to make a cup with a handle ?
we can see it created a handle a long time ago on the left and went like a rock down almost lost 75% 
and then it stayed in a tight range for one year and a half before it's broken up to a new all time high ...

Now it's forming the handle on the right side and the bottom was today at $19.91 probably will take a month or a little bit more to finish it .. after that the stock will shoot to the stars for at least $49 in a few months 

I could be wrong but technically it's very possible and David's fundmental analysis is supporting what I'm saying ...

we just need to wait and see ...

[David Randolph]

Here in Kuwait more than 70% are using the mobile internet but the most popular aircards are Sierra's cards ..

Well, I own Sierra too

70%? Are you sure Garoh, that seems like a lot (well, Koweit is a very rich country). If Koweit was the average I would say NVTL doesn't have all that much growth potential, because everyone that could buy, would have already bought. But I think that globally no more than 5% of people with internet have a mobile (not wireless, it's different) internet connection. But I expect this number to grow to 50% or more over the next couple of years ... (but I don't have the exact numbers, a nice research to do when I have some more time).

But, even when everybody has mobile internet, the business doesn't stop, because for more speed and reliability mobile operators need better cards and antennas, so NVTL will keep upgrading its products and costumers will keep buying.

Nice 5.9% bounce yesterday, I'll keep holding.

[Garoh]

Here in Kuwait more than 70% are using the mobile internet but the most popular aircards are Sierra's cards ..

Well, I own Sierra too

70%? Are you sure Garoh, that seems like a lot (well, Koweit is a very rich country). If Koweit was the average I would say NVTL doesn't have all that much growth potential, because everyone that could buy, would have already bought. But I think that globally no more than 5% of people with internet have a mobile (not wireless, it's different) internet connection. But I expect this number to grow to 50% or more over the next couple of years ... (but I don't have the exact numbers, a nice research to do when I have some more time).

But, even when everybody has mobile internet, the business doesn't stop, because for more speed and reliability mobile operators need better cards and antennas, so NVTL will keep upgrading its products and costumers will keep buying.

Nice 5.9% bounce yesterday, I'll keep holding.

David me too I have Sierra 850 

Yes I'm sure maybe even more than 70% , most of the people are going for Laptops and they are buying the wireless connection equipments from Sierra and Novetal ..

[la-onda]

just fyi:

NVTL: To Release Q2 Results Aug 06 [AMC]
Friday , August 03, 2007 13:00ET

Novatel Wireless Inc (Nasdaq NM: NVTL) is scheduled to release its Q2 financial results on August 06, 2007, after the close of the market (AMC).

CONSENSUS ESTIMATES:

Q2 Revenue: $95.71 million
Q2 EPS: $0.30 per share

PREVIOUS PERIOD:

Prev Q2 Revenue: $45.65 million
Prev Q2 EPS: $0.02 per share

I am optimistic for todays Q2 results...
cheers
Oliver