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Inseego Corp. (INSG)

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  • s
    steven M
    Inseego Is Set For A Big H2 Comeback

    Jun. 10, 2021 5:20 AM ETInseego Corp. (INSG)4 Comments4 Likes

    5G and SaaS managed cloud more than doubled, now 44% of revenue and gross margin expanded 560bp y/y as a result, yet we're only in the early innings here.
    Another big opportunity is the enterprise business, which got off to a flying start.
    Headline numbers don't look promising as the work-from-home boost has subsided, but things will continue to improve, driven by revenue growth, margin, and valuation metrics expansion.
    Looking for a portfolio of ideas like this one? Members of SHU Growth Portfolio get exclusive access to our model portfolio. Learn More »
    Network repeaters, base transceiver.
    Olgaviare/iStock via Getty Images
    We recently increased our holdings of Inseego (NASDAQ:INSG) in the SHU Growth portfolio as we think the shares have fallen way too much and are set for a big comeback in the second half of the year.

    Finviz Chart

    Source: FinViz

    Our investment thesis is straightforward:

    The crash in the share price from February to May has been caused by the end of the work-from-home demand boost (which was predominantly for 4G gear) and the shift from 4G to 5G; however, there is still brisk demand for 4G gear.
    Demand for 5G gear is taking off and is only in the early innings, with Inseego having multiple agreements with multiple carriers.
    Margins on 5G, especially its newest second-generation hotspots and access points are higher than those for 4G.
    The company is just entering the enterprise market which is 3x the size of the carrier market and where it can leverage its success in the carrier market.
    The company's SaaS Manage Cloud suite of solutions is growing fast, already 24% of revenue.
    The growth of the SaaS business should lead to a significant valuation multiple expansion for the shares.
    With the Q1 results, we see our thesis confirmed. This is a company that is still in the early innings of the 5G build-out, with all of the US Tier 1 carriers now as customers and a world to win abroad waiting.

    Even more importantly, it's transitioning into something better with a rapidly growing SaaS Manage Cloud business that is lifting on its 5G success and producing recurring revenues at much higher gross margins.

    On top of that, there are the first sales to the enterprise market, and these also came with a high SaaS Manage Cloud attachment. This market is 3x the size of the carrier market so this is a significant development.

    While the Q1 figures were somewhat disappointing, and although the slowdown in sales didn't come unexpected, there are clearly better times ahead. We remain very bullish on the shares.

    A shift from a device maker with relatively low margins to a SaaS business producing high margin recurring revenue will benefit valuation multiple expansion at some point in the future.

    Growth drivers

    We see numerous growth drivers for the company

    5G hotspots
    5G fixed wireless
    Enterprise market
    SaaS Manage suite

    While the work-from-home boom has subsided, demand is still higher than pre-pandemic and the company sells a new generation of hotspots. This market isn't going to go away anytime soon and management argues that 4G sales aren't being cannibalized by 5G.

    While ultimately this market will shrink, there are no signs this is imminent, and demand is still higher compared to the pre-pandemic level, which is saying quite a lot as 4G is hardly a new technology.

    5G hotspots and fixed wireless

    Demand is rising fast and the company keeps adding carriers as customers. In this quarter, T-Mobile (TMUS) which in a short time already became the biggest 5G customer with mobile hotspots and the SaaS suite. They also added a new carrier as a 5G customer, Sunrise from Switzerland.

    5G mobile hotspots were good for 20% of company revenue and are set to be bigger than 4G sales in H2 of the year. It also generates higher gross margins. It's also important to note that 5G sales are not cannibalizing 4G sales; they're additional.

    5G fixed wireless is now taking off in addition to the 5G hotspots. From the Q1CC:

    The most important development in the last six months has been our 5G fixed wireless access portfolio. And the great news is that every customer dialog now includes fixed wireless in addition to our hotspots. It is key for mobile operators to create new revenue streams to generate a return on their capital investment and acquiring spectrum and building national networks. And it's not only relevant for consumer home broadband and entertainment, but also in the enterprise and private network space.

    Enterprise market

    The enterprise market is new for the company, but it has already made sales in Q1, so we're off to a good start here. This market is 3x the size of the carrier market, so this is a very important new segment for the company. T-Mobile has already certified three of
  • J
    Link to the Stifel conference from the other day. Unlike Cowen, this one had a Q&A segment towards the end.
  • R
    This stock taught me a lot of patience, a great but expensive lesson.
    I am glad I did not sell my base position in this.
  • g
    I have said this before, Mondor is pointing out just about everything that will propel this company. Today he re iterated the 4g scare by some of us. Convincingly articulating the need for 4g to exist. Glta
  • J
  • K

    Recently the same experiment was held together with inseego but now no mention about.
  • r
    New FCC filings and partnerships signed every week! I love it. Not to mention INSG promoting at investor conferences this week and next, bound to be more partnerships. Shorts on here getting nervous so expect some desperation posts saying all these new partnerships and filings are bad or that the technicals are all pointing negative, or even my favorite - “the balance sheet is bad”. As I said before and I’ll say it again now in regards to the balance sheet, if you want a good balance sheet go buy a blue chip stock, this is arguably a spec, 5g play and people know what they’re buying so thanks for highlighting all the negatives you shills in an attempt to try to get people to panic sell a company that has solid 5g potential in the early stages of growth. These are the same shills that would have told you Netflix Apple and Amazon were all bad buys at 8$ a share. INSG is positioning itself well by having paid off ALL bank debt, so when revenues pick up from all of these deals you can expect good news.
  • D
    Cowen upgrades to OUTPERFORM ..... It's up and away!
  • S
    New FCC filing today.

    The MD2000 is the piece (guts) that goes inside the other products they sell. This change enables bands n7 and n38 through a software change.
  • W
    I don't mean to demean anyone on this board or throw a wet blanket on the enthusiasm for INSG stock, but get real. The share price hasn't gone up in the past month because of anything happening at the company. It followed the market down, and it's following it back up. INSG stock performance has been TERRIBLE over the past several months, but so have many others. I own a little of this, but I don't see it doing well at all. Better to buy MRVL.
  • C
    Selling my 7 1/2 and 10 June calls by end of week. Expire next week, up 42 and 74% respectively since I shared purchases. Rise could continue next week, but don’t want to look a gift horse in the mouth. Too many long timers failed to sell rallies in the past. Good luck.
  • U
    we will get there, accumulate & patience
  • D
    Large call option trade with 10 and 12.5 calls!!!
  • R
    I agree with what Ray wrote here, and most of the wild speculation has slowed. We are on a much more positive footing now.
  • s
    steven M
    since we hit the support at 7.13 we have had 14 of 18 up days. Must expect some sideways to slightly down at some point in here,
  • s
    steven M
    over 1,000,000 shares at 10:40. Much better volume.

    all good technical indicators . Where there is smoke there is FIRE!!

    Bought the Sept 10 calls at .80 10 days ago or so to leverage up my position which is still too much under water.
  • r
    Larry, have you changed your negative position since we have been getting all this green here lately!
  • V
    The stock price rose very consistently today and the volume was steady. From past experience, this indicates a general positive interest in the stock rather a one day deal. Smart money should be buying here.
  • D
    Presentations will be made by INSG at the following upcoming investor conferences ..... good opportunity to gain institutional interest and investment:

    Cowen 49th Annual Technology, Media, & Telecom Virtual Conference (June 1-3, 2021)

    Stifel 2021 Virtual Cross Sector Insight Conference (June 8-10, 2021)