Sequans Communications (NYSE: SQNS) Maintains Buy Rating and $3.00 Price Target from Roth/MKM After Deal with Qualcomm
Sequans Communications has solidified its position in the market with a strategic deal with Qualcomm, selling its 4G technology for $200 million. This move not only funds Sequans to break-even but also validates its technology portfolio. With over $1 in net cash per share expected post-deal, Sequans is undervalued, especially as it transitions to a 4G/5G provider. The future introduction of RedCap and eRedCap technology in 2025 highlights the company's growth potential.
The recent agreement with Qualcomm secures substantial capital for Sequans, ensuring its operational sustainability and industry recognition. Despite reporting a 26.3% increase in Q1 revenues, the company still faces challenges, with an operating loss of $8.5 million. Standstill agreements with debt holders provide some relief, while a $15 million licensing deal and focus on low-power 5G technology show promise for future revenue growth.
Although Roth/MKM has adjusted the price target slightly, down to $3.00, the firm maintains its buy rating on Sequans. The company continues to explore strategic options to enhance shareholder value, including a potential sale or high-value licensing deal. Real-time data from InvestingPro reveals Sequans' market position, with a market capitalization of $71.23 million and a decline in revenue of 47.17%. Despite challenges, the company maintains strong profitability, with a gross profit margin of 68.1%.
InvestingPro Tips highlight a recent bullish trend in Sequans' stock performance, with significant returns over the past week and month. However, the stock is considered overbought, and analysts do not expect profitability this year. Additional insights from InvestingPro can aid investors in making informed decisions as Sequans navigates its transition to a focused 4G/5G technology provider post-deal with Qualcomm.
In conclusion, Sequans' deal with Qualcomm has positioned the company for growth and industry recognition. While challenges remain, the company's strategic moves and focus on emerging technologies show promise for future success. Investors should consider the company's financial health and stock performance when evaluating their investment options.