Is Sonim Technologies a Winner in the Communications Equipment Industry? Rugged mobile devices provider Sonim Technologies' (SONM) shares have been on a downward trajectory over the past few months. However, the stock has been gaining momentum lately on recent positive...
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Rugged mobile devices provider Sonim Technologies' (SONM) shares have been on a downward trajectory over the past few months. However, the stock has been gaining momentum lately on recent positive developments by the company. But will the stock be able to maintain this momentum, given SONM's weak financial position? Keep reading to learn more.
Sonim Technologies, Inc. (SONM) in San Mateo, Calif., provides ultra-rugged mobile devices, including phones, barcode scanners, and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles.
The company has introduced several rugged devices and accessories and has been venturing into the international markets over the past months. Also, earlier this month, SONM announced that its ultra-rugged XP8 smartphone has integrated with the Walkie Talkie in Microsoft Corp.'s (MSFT) Microsoft Teams application to provide a secure and simple solution to frontline workers. Furthermore, SONM plans to launch additional new carrier devices in the third quarter of 2022, including a new 5G rugged smartphone and a phone with new features commonly found on radios, which is likely an ideal solution for the growing Push-to-Talk over Cellular (PTToC) market. "With the launch of these additional devices, we believe Sonim will have a fully refreshed line of ultra-rugged mobile devices tailored to large global addressable markets where our unique design features deliver significant value to enterprise and public sector customers," said Bob Tirva, President, Chief Financial Officer, and Chief Operating Officer.
The stock has slumped 89.1% in price over the past year and 68.8% over the past six months. However, the recent positive business updates and the collaboration with Microsoft has excited investors. Over the past month, the stock has gained 81.2% to close yesterday's trading session at $1.02.
Here is what could shape SONM's performance in the near term:
Poor Profitability
SONM's 19.51% gross profit margin is 60.3% lower than the 49.14% industry average. Also, its EBITDA margin and net income margin of negative 60.99% and 61.15%, respectively, are substantially lower than the 13.78% and 5.69% industry averages.
Moreover, SONM's negative 141.81%, 87.23%, and 92.53% respective ROE, ROA, and ROTC compare with the 7.30%, 3.50%, and 4.78% industry averages.
Bleak Financials
For the year ended Dec. 31, 2021, SONM's net revenues decreased 14.7% year-over-year to $54.57 million. Its gross profit stood at $6.41 million, down 57.8% from its year-ago value. Also, its loss from operations increased 29.9% year-over-year to $38 million, while its net loss grew 29% from the prior-year quarter to $38.63 million. The company's net loss per share came in at $4.08, compared to the $6.48 year-ago value.
Unfavorable POWR Ratings
SONM has an overall D rating, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an F grade for Quality, which is consistent with its negative profit margins.
SONM has a D grade for Growth, in sync with its declining financials in its last reported fiscal year.
Among the 54 stocks in the Technology - Communication/Networking industry, SONM is ranked #52.
Beyond what I have stated above, you can also view SONM's grades for Sentiment, Stability, Momentum, and Value here.
View the top-rated stocks in the Technology - Communication/Networking industry here.
Bottom Line
The company's sales of certain legacy products declined in the last fiscal year, negatively impacting its top line. Although SONM is currently focusing on catering to the global market, and its planned launch of the new line of devices later this year should aid its growth, its return to profitability timeline seems uncertain. Furthermore, considering its weak bottom line and negative ROE, we think it could be best to avoid the stock now.
How Does Sonim Technologies, Inc. (SONM) Stack Up Against its Peers?
While SONM has an overall POWR Rating of D, one might want to consider investing in the following Technology - Communication/Networking stocks with an A (Strong Buy) rating: Extreme Networks, Inc. (EXTR), AudioCodes Ltd. (AUDC), and Viavi Solutions Inc. (VIAV).
Want More Great Investing Ideas?
SONM shares rose $0.01 (+0.98%) in premarket trading Wednesday. Year-to-date, SONM has gained 10.65%, versus a -5.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree's keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master's degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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