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Why Boingo Wireless Stock Just Dropped 19%

By Rich Smith – Nov 2, 2018 at 1:46PM

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I blame guidance.

What happened

Shares of wireless "hotspot" specialist Boingo Wireless (WIFI) are down 18.9% as of 1:20 p.m. EDT Friday. That's hardly the response you'd expect investors to have, though, to a stock that just beat earnings estimates handily in its third-quarter earnings report (released last night).

According to Wall Street, Boingo was "supposed " to lose $0.10 per share on sales of only $63.8 million last quarter. Instead, Boingo reported yesterday that it lost only one penny per share and did $65.3 million in business -- beating on both earnings and sales.

Wifi icon

Sadly, Boingo got no bounce out of today's earnings beat. Image source: Getty Images.

So what

So what went wrong? Boingo grew its sales more than 21% year over year, exceeding one Wall Street target. And it did so while losing less money than feared. (Boingo also lost a whole lot less money in this year's third quarter than it did in last year's -- when losses were $0.09 per share). Boingo also reported free cash flow for its Q3 -- $8.5 million worth of the green stuff, versus cash burn of $2.7 million in the year-ago quarter.

I see two possible reasons for investors' disappointment. First, Boingo's beat, while undeniable, wasn't quite as strong as its performance last quarter, when Boingo posted even stronger sales growth and a bigger earnings beat.

Now what

But second, Boingo also issued new guidance yesterday. In it, management predicted that Boingo will end this year with losses of between $0.12 and $0.24 per diluted share on sales of $243 million to $250 million. Assuming the midpoint in that guidance will be closest to the mark, Boingo appears likely to "miss sales" in Q4 -- because Wall Street has been looking for revenue of $249 million.

On the plus side, taken at the midpoint, Boingo's likely loss of $0.18 per share will be a lot better than the $0.24 loss that Wall Street is anticipating. It's just a pity that right now, investors seem to be overlooking that fact.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of Boingo Wireless. The Motley Fool has a disclosure policy.

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