What happened

Shares of Inseego (INSG 11.04%), the maker of mobile hot spots and other internet connectivity devices, were pulling back today after the company reported second-quarter earnings that seemed to underwhelm. It also announced a new CFO, Craig Foster. As of 12:41 a.m. EDT on Thursday, the stock was down 19%. 

A man holding a smartphone with "5G" on top of it.

Image source: Getty Images.

So what

Inseego has attracted a lot of investor attention during the pandemic as sales of its mobile hot spots have surged and the company is seen as a popular 5G play as anticipation builds for the rollout of the new telecom technology. That enthusiasm pushed the stock up 101% year to date before last night's earnings report, and with high expectations baked in, the results seemed to miss the mark.

Inseego said revenue rose 44.4% in the quarter to $80.7 million, which edged past the analyst consensus at $79.8 million. Growth was propelled by its Internet of Things and mobile solutions segment, where sales jumped 66% to $66.2 million as demand for mobile hot spots remained strong with most of the country still working from home.

On the bottom line, adjusted EBITDA improved from $2.6 million to $4.3 million, and it posted an adjusted loss of a penny per share, equal to estimates and better than an $0.08 per-share loss in the year-ago quarter.

CEO Dan Mondor touted the upcoming 5G launch, saying: "We reported an exceptionally strong quarter with outstanding operational execution in every part of the company and over $80 million in revenue. We're on track to launch our new 5G portfolio with multiple operators in the coming months and are seeing phenomenal performance in pre-launch field trials on live 5G networks." 

Now what

While the quarterly numbers were within the expected range, management declined to give guidance for the third quarter, though it called out strong demand for 4G and first-generation 5G products on the earnings call, and the lack of guidance may have spooked investors. 

Inseego also got a pair of analyst downgrades this morning, showing that sentiment is cooling. While investors should keep an eye on the stock as it rolls out its 5G products later this year, today's pullback seems reasonable given the outsize gains this year.