Shares of ORBCOMM (NASDAQ:ORBC) were down 23% at 1:20 p.m. EDT today following the release of the company's second-quarter results before trading opened this morning.
The provider of satellite-connected Internet of Things equipment and services reported revenue of $67.1 million and a loss of $0.08 per share under generally accepted accounting principles (GAAP). With both figures relatively in line with Wall Street analyst estimates -- if a very tiny bit below -- it's a little surprising to see shares falling so sharply.
In addition to results that generally met investor expectations, the company reported a few improvements worth noting. In last year's second quarter, it generated a $1.2 million operating loss, and cut that to less than $200,000 this time.
Moreover, cash flows improved substantially. ORBCOMM reported $11 million in positive operating cash flow, a sharp reversal from last year's $11.8 million in negative operating cash flow.
Management said it expects $145 million to $155 million in revenue in the second half of the year, which works out to just under 10% growth at the midpoint. So it's a bit hard to draw a direct line between the company's results and the extreme beating Mr. Market is delivering to its stock today.
One potential source: short activity. According to the most recent data, 6.2% of shares were sold short, and short interest has generally increased since the beginning of the year. Especially for a small-cap stock with relatively low average daily trading volume, 6.2% held short is a relatively large percentage. If shorts added to their bets against the company based on today's earnings, it very easily could have compounded even a slightly negative impression of results that were just meh.
ORBCOMM's beating today seems mismatched with the financial results. Its growth may not be as high as some expect, but its underlying cash flows are relatively sound and improving, and it has more than enough cash on its balance sheet to manage future debt maturities (of which there are none in the next four quarters).
I don't know that I'd call ORBCOMM a buy, but investors interested in the company could probably do worse, and I don't buy into any thesis that says it's worth shorting.