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Bear of the Day: Sierra Wireless, Inc. (SWIR)

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Sierra Wireless, Inc. (SWIR) is an Internet of Things solutions provider that reported an adjusted first quarter loss on May 13 and its earnings outlook has trended in the wrong direction since then.

What’s Going On?

Sierra Wireless is a IoT solutions provider that combines devices, network services, and software. The Vancouver, Canada-based company has seen its revenue sink the past several years, with its FY20 sales down roughly 20%.

Luckily, the firm has started to bounce back, with its recently-reported Q1 sales up 5%. Its top-line growth was driven by 26% expansion in its Connectivity, Software, and Services unit.

Despite the top-line positivity, it reported an adjusted loss of -$0.26 a share, as it tries to navigate a challenging environment. “We have done well managing costs despite a tight supply chain environment and we lowered our operating expenses sequentially in the first quarter," CEO Kent Thexton said in prepared remarks.

The company also announced in March that it was the victim of a ransomware attack that forced it to temporarily halt production. SWIR has upgraded its security protocols since then.

Investors should know the firm has not officially announced a new chief executive even though Sierra Wireless announced back in January that Thexton plans to retire from his position. “The CEO search is going well, and the Board's run a strong process in many good candidates,” Thexton said on the company’s earnings call.

“They've converged on a candidate at this point and expect you'll see us make an announcement early in Q3. So I’ll likely going to be around a little bit longer than my June 30 target that I had put out there, but expect we'll make that transition.”’

Bottom Line

Zacks estimates call for SWIR’ revenue to fall another 9% in 2021 to mark its third-straight year of declining sales. Meanwhile, it’s still projected to report an adjusted loss of -$0.54 a share, which does mark an improvement from last year’s -$1.40 loss.

Sierra Wireless has also seen its FY21 and FY22 earnings estimates trend in the wrong direction, with its consensus figures down 20% and 25%, respectively. These downward revisions help SWIR land a Zacks Rank #5 (Strong Sell) right now.

On top of that, the stock grabs “F” grades for Value and Growth in our Style Scores system and a “D” for Momentum. Plus, the stock has already popped about 16% since its report.

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