On Tuesday, Sequans Communications (NYSE:SQNS) stock retained its Buy rating and $3.00 price target from Roth/MKM. Following the completion of Qualcomm (NASDAQ:QCOM)'s $200 million asset acquisition of Sequans' 4G IoT technologies on Monday, Sequans' financial position has significantly shifted. The company has transitioned from a net debt of $80 million to holding net cash of the same amount.
The successful closure of this transaction has not only improved Sequans' balance sheet but also served as an endorsement of its technology portfolio by a major industry player. This development is anticipated to bolster the sales of Sequans' 4G products, which are expected to benefit from $250 million of design wins.
Looking ahead, Sequans appears poised for further growth with the upcoming introduction of RedCap technology and the potential for monetizing its 5G portfolio. These factors contribute to Roth/MKM's positive outlook on the company, identifying a possible increase in value to $3-5+ per share. In light of the recent transaction with Qualcomm, Sequans is highlighted as a top micro-cap selection.
In other recent news, Qualcomm Incorporated has acquired 4G IoT technology from Sequans Communications. This strategic acquisition aims to bolster Qualcomm's market position in industrial IoT connectivity and enhance its product offerings. Meanwhile, Sequans has reported Q1 2024 revenues of $6.0 million and managed to reduce its operating loss to $8.5 million from the previous quarter's $12.8 million.
Sequans has also adjusted its American Depositary Shares (ADS) structure, enacting a 1-for-2.5 reverse stock split for the ADSs. This move is expected to increase the trading price of the ADSs and ensure compliance with the New York Stock Exchange's minimum price requirement.
In a transformative agreement, Sequans sold its 4G technology to Qualcomm for $200 million. This deal has been viewed as a validation of Sequans' technology portfolio by Roth/MKM, which maintains a Buy rating for Sequans.
Further developments include Sequans securing standstill agreements with Lynrock Lake, Nokomis, and Renesas, and a $15 million licensing agreement for the Monarch2 LTE platform with an undisclosed technology company. However, Sequans has suspended the development of its 5G Taurus product to focus on low-power 5G for massive IoT applications.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Sequans Communications' (NYSE:SQNS) financial position and market performance. The company's market capitalization stands at $73.99 million, reflecting its current position as a micro-cap stock. Despite the positive outlook from Roth/MKM, InvestingPro Tips indicate that SQNS is not currently profitable, with a negative P/E ratio of -1.44 over the last twelve months as of Q2 2024.
However, aligning with the article's mention of improved financial position, SQNS has shown impressive short-term market performance. InvestingPro data reveals a strong 130.13% price return over the last three months and a remarkable 239.81% return over the past six months. This surge in stock price could be attributed to market anticipation of the Qualcomm deal and its potential impact on Sequans' future prospects.
It's worth noting that analysts anticipate a sales decline in the current year, which investors should consider alongside the company's improved cash position. For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for SQNS, providing a deeper understanding of the company's financial health and market position.
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