August 3, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of satellite networking company ViaSat (Nasdaq: VSAT ) are coming down to Earth today, off 10% after posting a net loss for its latest quarter. The company beat analyst expectations of $229.4 million in revenue with a $241.8 million top line, but lost $0.33 per share against analyst expectations of $0.12 in losses per share. Discounting special items, ViaSat's non-GAAP net loss was still worse than expectations, limping to the finish line with $0.18 in losses per share.
So what: ViaSat posted record contract awards of $332.6 million, but that wasn't enough to distract the market from the company's sinking bottom line, which has failed to keep pace with booming revenues. This is ViaSat's second consecutive quarterly net loss, and that weakness led Oppenheimer to downgrade the company to "market perform." ViaSat's revenue per user is up 3.5% sequentially, and the company also saw 40% growth in new installations, but profitability simply isn't keeping up.
Now what: ViaSat's already-high P/E looks to be erased when the numbers are added up. Since free cash flow has been significantly negative for many quarters, there's not likely to be a silver lining in yesterday's poor earnings. It looks like the market's reaction was right -- this is a company that's failing to meet its promise.
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