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Why Sequans Stock Slumped Today

By Rich Smith - Apr 27, 2021 at 1:23PM

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Sequans "missed earnings" in Q1 -- and looks likely to miss again in Q2.

What happened

Shares of Sequans Communications (SQNS -2.28%), a tiny French maker of semiconductors optimized for Internet of Things (IoT) functions, crashed in Tuesday trading, falling 9.2% through 1:30 p.m. EDT.

It has only itself to blame.

Cartoon character sliding down a red arrow.

Image source: Getty Images.

So what

This morning, Sequans reported its fiscal first-quarter 2021 earnings -- or more precisely, its Q1 2021 losses. Instead of the $13.8 million in sales that analysts had projected, Sequans collected only $12.3 million, and instead of the $0.21 per American depositary share (ADS) that analysts predicted, Sequans lost $0.33 per ADS. (Albeit on a "non-IFRS" basis, the company says losses were only $0.15 per ADS.)    

Sequans' sales climbed 40% year over year despite the miss but were down 22% sequentially, suggesting that growth may be stalling. Conversely, gross profit margins that were up sequentially were down year over year, slumping by 120 basis points to just 50.1%.

Now what

In its earnings release, Sequans emphasized the "continued ... strong momentum" and "solid demand" in its IoT business. Problem is, management only expects this to translate into about "a 10% sequential increase in revenue" in the second quarter of 2021.

Assuming management is right, that would translate into about $13.5 million in Q2 revenues, but Wall Street had been looking for $15.6 million. Result: After missing earnings in Q1, Sequans seems to be saying it's going to miss again in Q2.

No wonder investors are disappointed.

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