Will Synchronoss Stock Keep Falling Through the Cloud?

Synchronoss relationships with existing mobile providers are essential to its overall success. Image: Synchronoss Technologies.

The mobile revolution has dramatically increased interest in moving away from burdensome hardware arrays toward sharing central servers through cloud-computing solutions. Synchronoss Technologies (SNCR +0.00%) has aimed to deliver on that promise, with its efforts to make mobile technology as useful as possible. Yet with the company releasing its third-quarter financial report on Wednesday, Synchronoss investors have endured a fairly steep drop in the stock price recently, raising concerns about whether a potential slowdown in growth could hamper the company's future. Let's take a closer look at what investors should expect Synchronoss Technologies this quarter and whether it can overcome the challenges it faces.

Stats on Synchronoss Technologies

Source: Yahoo! Finance.

Will Synchronoss Technologies keep earnings strong?
In recent months, investors have generally been upbeat on Synchronoss' earnings prospects, pushing third-quarter estimates up by $0.02 per share and boosting full-year 2015 and 2016 projections by more than a dime per share each. The stock, though, has suffered dramatic losses, falling more than 20% since late July.

Synchronoss Technologies actually started the quarter on strong footing, with its second-quarter financials showing considerable strength. Sales jumped by a third, and net income soared by more than half as the company continued to see impressive results from its cloud services business. Even the activation services segment, which has grown at a slower pace more recently, was still able to contribute to Synchronoss' overall revenue gains.

Yet a surprising one-day drop in late September highlighted some of the long-term concerns that at least some investors seem to have about Synchronoss' long-term prospects. Synchronoss shares lost a quarter of their value at one point on Sept. 23 before recovering to an 11% drop for the day, with no obvious news supporting the move. Some speculated that concerns about the company potentially losing Verizon (VZ 1.84%) as a client for device-activation services for its mobile division might have motivated the move, and that rumor got enough attention that Synchronoss chose to issue a press release after the market closed that day to emphasize that it still has a multi-year contract with Verizon and that there had been no change to that agreement.

The Verizon partnership is clearly valuable to both companies. A Verizon executive supported the partnership in the press release, explaining how "most recently we've extended the partnership to deploy similar applications to customers of our wired services" and stressing that Verizon "remains committed to the relationship with Synchronoss as we continue to drive added value and capability of our cloud services." For its part, Synchronoss also celebrated the relationship, with founder and CEO Steve Waldis saying, "We are proud to partner with an industry leader such as Verizon Wireless. ... We look forward to continuing to build on our partnership and finding new, innovative ways to further improve the user experience."

Yet Synchronoss has also focused on building up a worldwide presence. In early October, the company said it would work with Mobifone to deploy services in the fast-growing Vietnamese mobile market. The company believes that the contract value over the three-year relationship will generate more than $80 million, and with Synchronoss' Personal Cloud product as well as network activation and mobile-content transfer services, the relationship could spur similar deals throughout the fast-growing region.

In the Synchronoss Technologies earnings report, be sure to watch for any comments related to the stock price's recent drop and any steps the company is taking to address it. With the stock still maintaining a fairly hefty valuation even after the decline, Synchronoss needs to keep building new avenues to growth while ensuring it manages its existing relationships with care. If it does so, then Synchronoss should have more opportunities to find new customers and expand its business with existing customers as well.