Sierra Wireless Beats Expectations in Q3

Sierra Wireless (SW) reported a better-than-expected third quarter, despite posting a lower revenue and a wider loss compared to a year ago.

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Sierra Wireless provides IoT solutions that combine devices, network services, and software to unleash value in the connected economy.(See Insiders’ Hot Stocks on TipRanks)

Revenue & Earnings

Total revenue came in at $82.5 million for the quarter ended September 30, down 27.2% year-over-year. The drop in revenue is attributable to reduced hardware sales due to manufacturing capacity constraints in Vietnam as a result of COVID-19 restrictions.

Revenue from IoT solutions was $53.7 million, down 32.3% from the third quarter of 2020. Enterprise solutions revenue was $28.8 million, a decrease of 15.3% from the third quarter of 2020.

The wireless broadband modem maker reported a net loss from continuing operations of $38.4 million in Q3 2021, compared to $14.5 million in Q3 2020.

Adjusted net loss from continuing operations was $20.7 million ($0.56 per share) in the third quarter, wider than the loss of $11.7 million ($0.32 per share) reported in the prior-year quarter.

Analysts expected Sierra Wireless to post a loss of $0.41 per share on revenue of $77.8 million.

Manufacturing Capacity Constraints Improving

Sierra Wireless president and CEO Phil Brace, said “We continue to experience very strong customer demand, and we had record backlog at the end of the Third Quarter. The manufacturing capacity constraints we experienced in Q3 are improving in the current quarter but we are still facing the industry-wide tight supply for parts and components.

“I would like to thank our customers, suppliers and employees as we collectively work through the current environment.”

For the fourth quarter of 2021, Sierra Wireless expects its revenue to be between $120 million and $135 million.

Wall Street’s Take

Last month, Colliers Securities analyst Derek Soderberg maintained a Buy rating on SW and set a price target of $25 (C$31.12). This implies 55.4% upside potential.

Overall, consensus on the Street is that SW is a Moderate Buy based on three Buys, two Holds, and one Sell. The average Sierra Wireless price target of C$25.73 implies 28.5% upside potential to current levels.