Zacks Investment Research downgraded shares of Novatel Wireless Inc. (NVTL) from OUTPERFORM to NEUTRAL on May 24, 2012, with a target price of $2.25.
We are downgrading our recommendation on Novatel to Neutral, following its mixed financial results in the first quarter of 2012. Although revenue surpassed the Zacks Consensus Estimate, earnings per share were way below it. We believe the company's overall financial condition will improve in the rest of 2012, driven by huge market traction of Novatel's 4G products, especially the 4G MiFi intelligent hotspots and Expedite embedded solution. The company is upgrading its existing customers to its innovative 4G LTE product suite. Diversification into machine-to-machine intelligent asset management solutions and newly developed insurance telematics and fleet management products will further boost Novatel's future growth. Despite these positives, we do not expect the company to achieve profitability any time soon. Precipitous losses may jeopardize the company's healthy balance sheet going forward.
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