On Thursday, Inseego Corp. (NASDAQ:INSG) received an improved stock rating from Roth/MKM, moving from Neutral to Buy, with an increased price target set at $15.00, up from the previous target of $13.00.
The firm cited several reasons for the optimistic outlook, including a significant reduction in net debt, robust growth in the company's core products, and the strength of the management team.
The analyst from Roth/MKM highlighted the company's financial restructuring, noting that Inseego's net debt has been substantially reduced to $25 million from over $150 million as of January 1, 2024. This improvement in the balance sheet is seen as a key factor in the rating upgrade.
In addition to the financial restructuring, the company's core product growth stands at an impressive 25%. The analyst pointed to the strong performance despite what was perceived as weakness due to the discontinuation of certain operations.
The pending sale of the Telematics division, which is expected to bring in $52 million in cash, had cast a shadow over the third quarter results of 2024, showing a 30% organic growth, and the fourth quarter guidance predicting a 25% organic growth.
The analyst expressed confidence in the company's future, anticipating that the introduction of new products, expansion of sales channels, and potential strategic acquisitions will further improve Inseego's outlook for the years 2025 and 2026.
Inseego's stock had experienced a 40% decline due to misinterpretations surrounding the discontinued operations, which the analyst suggests presents a buying opportunity. With the Telematics sale on the horizon and a clear path of growth identified, Roth/MKM's revised target and rating reflect a positive view on the company's trajectory.
In other recent news, Inseego Corp reported a significant increase in Q3 revenue, marking a 27% growth to reach $61.9 million. This robust growth was driven by strong carrier promotions and the expansion of its SaaS management platform. The company also made strides in restructuring its financial position, reducing long-term senior debt from over $160 million to $41 million.
In addition, Inseego is in the process of appointing a new CEO, a decision expected to be finalized in Q1 of 2025. The company also anticipates continued year-over-year growth in revenue and adjusted EBITDA for Q4 2024, with projected revenue from continuing operations ranging between $43 million and $47 million.
Despite facing sales pressure in its fixed wireless segment due to a merger involving a major U.S. carrier customer, Inseego has managed to improve its gross margin to approximately 38%. The company is also focusing on diversifying its revenue base while increasing gross margins. These are among the recent developments shaping the future of Inseego Corp.
InvestingPro Insights
To complement the positive outlook presented by Roth/MKM, recent data from InvestingPro offers additional context to Inseego's financial situation and market performance. Despite the company's recent challenges, InvestingPro data shows that Inseego's revenue for the last twelve months as of Q2 2024 stands at $195.5 million, with a quarterly revenue growth of 10.44% in Q2 2024. This aligns with the analyst's observation of robust growth in core products.
InvestingPro Tips highlight that 3 analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Inseego's financial prospects. This corresponds with the article's mention of anticipated improvements for 2025 and 2026. Additionally, the stock has seen a significant price uptick over the last six months, with InvestingPro data revealing a remarkable 107.07% total return over that period.
However, investors should note that Inseego was not profitable over the last twelve months, with an adjusted operating income of -$23.59 million. Nevertheless, an InvestingPro Tip indicates that analysts predict the company will be profitable this year, which could be influenced by the financial restructuring and growth strategies mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Inseego, providing a deeper understanding of the company's financial health and market position.
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