Ticker: INSG
Company history: old Novatel
Inevitable new category: 5g
Market Cap: around 1B
Product of interest: wifi 4g/5g hotspot
Competitive advantage: American company; Huawei is getting nixed in West
Location: San Diego, next to Qualcomm
Management: experienced, new hires with excellent pedigrees
Sales Growth: pre-announced 50M expected, 80M more likely early May
Gross Margin: increasing in the IOT segment; not 70% but 30+ and growing
Special situation: #wfh; work from home phenomenon not going away
Contracts: all major telecoms and trials in the other largest, global presence
Debt: significant but inflection was rollup of convertibles recently by Joe Lewis of Tavistock who is also the major shareholder
Institutional: growing
Analysts: something I haven’t seen is an analyst upgrade and the same co upgraded 3 days later, accounts for recent price rise
Personal: my largest position by far, plan to retire off this one; might get bought out but hope it doesn’t
I remember hearing about INSG on Mad Money earlier in the year, and pretty sure Cramer said he hadn’t heard of it, but wish he did. That comment made me look in to them, but didn’t take a position.
It caught my attention again this month with the stock performance and then some analyst buy ratings.
I’m still on the fence…what has made this your top position? Is it the 5G future that caught your eye? I’m always looking for new high growth stocks, but INSG has had too many question marks for me to add it yet.
INSG caught my eye when doing due diligence on my theme of 5g. It’s inevitable that 5g will have a massive upcoming cycle. I am highly interested in small caps with the potential to become large caps.
I remember when Cramer said that and I had to laugh; that show is more for entertainment.
The largest question mark has been the debt. But the recent move by Joe Lewis makes me feel more comfortable.
Not mentioned in my post is that they also have a Saas vertical called Ctrack. However, my primary reason for investing was not the Saas vertical in this particular case.
Some of the recent analyst reports are excellent summaries if you can get a hold of them, certainly don’t want to reproduce them here.
First, it is a hardware company. It produces 3G, 4G and lately 5G. It’s revenue growth from what I can see is 18-19 (8%), 17-18 (-8%), and 16-17 (-10%). It’s gross margin looks to be between 28-30% over last 4 quarters. It’s cash position and current assets are low in relation to its Current assets. It has a lot of LTD. It’s cash flow negative. The investors here like to invest in primarily SaaS companies with much higher growth rates and margins with better cash flow and less LTD.
Second, it has lots of competitors in its space. Aren’t they competing with Huawei, Qualcom, Verizon, etc.
Thanks for the quick look. Much of this isn’t correct.
It has multiple verticals including a Saas vertical.
Expected revenue growth will likely be in the 30% if not higher range for some time to come. Meaning this company is at inflection.
Gross margin is increasing but that part in your post is correct and per my earlier post, in the 30’s.
LTD I addressed in my earlier post.
Earnings are negative at the moment but as I read on this board elsewhere, not exclusionary as most of it is due to growth investment.
As far as competitors, I discussed Huawei in my earlier post and why this is actually great for this company as its American. The others you mentioned are actually partners.
There are about 5-6 analysts that currently cover the name.
Current year (2020) eps est -0.7 but next year +0.24
Current year (2020) rev est 284M but next year 351M
There have been 4 eps revisions in the last 30 days
My belief is that this name will be a growth name for years, is in the right space (5g and enterprise Saas), with all the right partners.
Thoughts below are cobbled together from readings I have done from paid and public sources:
I believe the investment thesis for Inseego is "last mile connectivity" in association with the 5G revolution that is on the not so distant horizon; specifically for Inseego, the last mile will be wifi hotspot and Fixed Wireless Asset (FWA) related.
Specifically, Inseego is positioning to provide hotspot connectivity in a 5G world due to the limitations of the 5G radio frequency (i.e. mmWave), which has very short wave lengths, and therefore restricts 5G radio frequency from penetrating walls in order to connect to indoor devices. Due to the structure of the radio frequency, 5G has trouble not only penetrating walls but perhaps even glass as well as having transmission issues in inclement weather. While the mmWave travels must faster, it travels shorter distances and will require more connectivity between the transmission point of a tower and the endpoint of a device.
These connectivity issues will increase demand for a vast network of wifi hotspots for the mobile applications as well FWA to extend wireless networks and that is the opportunity that Inseego is working to exploit.
The WFH and Distance Learning craze has provided a Covid-19 boost to Inseego over the past several weeks as there has been a substantial increase in demand for 4G wifi hotspot connectivity.
I am long on Inseego based on large entry positions taken on Feb. 10th (currently +55.33% ITD) and February 11th (currently +42.74% ITD). I took an additional large position on March 12th, during the dark hours of the market correction and had a whopping +166.31% gain over 24 trading days that I sold out of this week. While I am long on Inseego, I just felt that most of that amazing gain was mostly due to momentum on news and not performance.
Addressing the debt question that has been mentioned in this board thread; the following thoughts are pulled from a paid service write-up on Inseego and are paraphrased here. This material has since been published in a public forum:
- INSG shows $138 million in long term debt on the balance sheet.
- Critics point out the company is highly leveraged relative to EBITDA.
- Cash and cash equivalents for Q3 was $13.9 million.
- Refer to Q3 2019 10Q Filing (Pg 15, 16) addressing $105 million in convertible notes and $46 million
term loan.
- There is a path to reducing this debt as the majority is convertible (with the stock price climbing),
through refinancing the loan and also with increased margins.
I own Inseego as part of a 5G "basket" of companies that I feel may help move us forward into and through a 5G world, when the world gets around to figuring out a 5G growth strategy. I am not sure that Inseego would pass the High Growth, High Margin litmus test for a concentrated portfolio for board members here.
Harley
I am bad at formatting; lets see if this is better:
I believe the investment thesis for Inseego is last mile connectivity in association with the 5G revolution on the not so distant horizon; specifically for Inseego, the last mile will be hotspot and Fixed Wireless Asset (FWA) related.
Specifically, Inseego is positioning to provide hotspot connectivity in a 5G world due to the 5G radio frequency (i.e. mmWave), which has very short wave lengths, and therefore restricts 5G radio frequency from penetrating walls in order to connect to indoor devices. Due to the structure of the radio frequency, 5G has trouble penetrating walls and even glass as well as having transmission issues in inclement weather. The mmWave travels must faster but travels shorter distances and will require more connectivity between the transmission point of a tower and the endpoint of a device.
These connectivity issues will increase demand for a vast network of wifi hotspots for the mobile application as well FWA to extend the wireless network and that is the opportunity that Inseego is working to exploit.
The WFH and Distance Learning craze has provided a Covid-19 boost to Inseego over the past several weeks as there has been a substantial increase in demand for 4G wifi hotspot connectivity.
I am long on Inseego based on large entry positions taken on Feb. 10th (+55.33% ITD) and February 11th (+42.74% ITD). I took an additional large position on March 12th, during the dark hours of the market correction and had a whopping +166.31% gain over 24 trading days that I sold this week. While I am long on Inseego, I feel that most of that amazing gain was mostly due to momentum on news and not performance.
Addressing debt; the following thoughts are pulled from a paid service write-up on Inseego and are paraphrased here. This material has since been published in a public forum:
INSG shows $138 million in long term debt on the balance sheet.
Critics point out the company is highly leveraged relative to EBITDA.
Cash and cash equivalents for Q3 was $13.9 million.
Refer to Q3 2019 10Q Filing (Pg 15, 16) addressing $105 million in convertible notes and $46 million term loan.
There is a path to reducing this debt as the majority is convertible (with the stock price climbing), through refinancing the loan and also with increased margins.
I own Inseego as part of a 5G “basket” of companies that I feel may help move us into and through a 5G world, when the world figures out a 5G strategy. I am not sure that Inseego would pass the High Growth and High Margin litmus test for a concentrated portfolio for members of this board.
Calif2, your INSG was featured on Mad Money, and they interviewed their CEO. Thought it was ironic timing since you just posted about the company to the board.