The Inseego Analyst: John Marchetti initiated coverage of Inseego with a Buy rating and $13 price target.
The Inseego Thesis: Inseego's expertise in the 5G universe should serve as a competitive advantage as service providers move to aggressively release 5G devices beyond just consumer handsets, Marchetti said in a Thursday initiation note. (See his track record here.)
The fixed wireless access and IoT opportunities alone are "significant," as operators want to leverage their 5G wireless network investment into consumer and commercial networks where they historically had to compete with high-cost and time-consuming FTTx efforts, the analyst said.
Inseego deserves credit for growing its customer base beyond its largest customer,Verizon Communications Inc. (NYSE:VZ), which accounted for around 50% of revenue from 2017 to 2019, he said.>
As of the first quarter of 2020, the company has shipped its technology to 11 global providers and has more trials underway, Marchetti said.
Continued growth should result in the company hitting Stifel's 2020 revenue estimate of $298.7 million and 2021 estimate of $358.6 million, the analyst said.
This implies a year-over-year revenue growth rate of 36% in 2020 followed by a 20% growth rate the following year.
Inseego also has "good visibility" into margin expansion as it shifts from fully transitioning its mobile and IoT manufacturing to Foxconn, he said.
5G products also come with superior gross margins versus 4G and should show a 200-basis-point margin improvement in 2020 followed by a 450-basis-point improvement in 2021, according to Stifel.
INSG Price Action: Shares of Inseego ended Thursday's session 6.89% higher at $11.01.