Novatel Wireless, Inc. (NVTL), is a leader in the design and development of intelligent wireless solutions based on 2G, 3G and 4G technologies providing wireless connectivity. The company delivers specialized wireless solutions to carriers, distributors, retailers, OEMs and vertical markets worldwide. Novatel Wireless' Intelligent Mobile Hotspot products, software, USB modems, embedded modules and smart M2M modules provide innovative anywhere, anytime communications solutions for consumers and enterprises. Over the last few months the company has been undergoing a product mix change as it has been trying to adapt to a new business environment. This, in turn, has seen the stock shed half of its valuation. Novatel began the year trading north of $14 and as of the writing of this article it is trading at $1.32, down 90% approximately. Investors in Novatel have felt some pain indeed. However, new investors, looking at the stock for the first time, may find very nice value here. Not only has the stock fallen 90% this year but we now find this technology stock trading under its cash balance. With a market cap of $46m and $56m in cash and no long term debt, the bottom may finally be in.
A look at the Novatel chart also gives some hope for investors here that a bottom could be in place. The stock has formed a symmetrical triangle over the last month with a breakout level of $1.35. A break here could quickly send the stock back to its pre-earnings release price of $1.75 to $1.80, a nice 30% move from here. Support is now at $1.24. As one can see from the chart, the stock has been out of favor all year and in the recent month has see increased tax selling. Removal from the S&P 600 Small Cap index is likely another reason for the recent drop. Such drops in price however can oftentimes afford new investors and traders a very nice buying opportunity.
Per the recent earnings report: "While it was a challenging period for legacy sales, we made fundamental progress during the quarter in the key segments and new product initiatives that will drive long term growth. Our primary focus remains on our market leading mobile broadband solutions and expanding our M2M segment. In both of these areas, we have a number of key growth drivers, including new product introductions, design wins and new customer acquisitions. During the quarter, we made the decision to change our OEM business model to focus only on new projects where our inventory and R&D investments will be adequately supported by our customers. This decision will both substantially improve our financial model and allow us to focus on our key growth areas."
Last month we highlighted Somaxon Pharmaceuticals (SOMX) as both a value and chart play in article, " Why Somaxon Parmacueticals Should Be A Double From Here." After yesterday's buyout the stock has doubled. Novatel offers a similar potential for investors. While 2012 has been a bad year for shares of Novatel it could be priced for a very nice rebound in 2013. Trading under its cash value makes it a very attractive takeover candidate right now. The company is in various stages of launching three major products in its MiFi product line, one of which is going through carrier certification and two of which are new product launches. A quick adoption this quarter by carriers could set the stage for a nice rebound in both their revenues and stock price. The rollout of 4g products can only help as well. As we look towards the new year and new prospects and the seasonality of stocks, Novatel could be one of those stocks that starts the new year off with a bang. The chart is right here and trading under cash value is very helpful. New investors in Novatel could see nice gains in the months ahead.
Disclosure: I am long NVTL.