Image source: Synchronoss Technologies.
Having large companies as customers can give a business a solid start, and Synchronoss Technologies (SNCR +0.00%) has used its relationship with mobile providers like AT&T (T +2.85%) to provide the backbone of its cloud-backup and mobile activation services. Lately, though, AT&T has been engaged in a price war with its U.S. rivals, and some think that could have an impact on Synchronoss.
With the company releasing its fourth-quarter financial report on Wednesday, Synchronoss investors are hoping they will see an end to the decline in their stock price over the past several months, but slowing growth could jeopardize the chances for a rebound. Let's look more closely at what investors should expect from Synchronoss Technologies this quarter and what's next for the cloud-mobile specialist.
Stats on Synchronoss Technologies
|
Analyst EPS Estimate |
$0.57 |
|
Change From Year-Ago EPS |
7.5% |
|
Revenue Estimate |
$155.33 million |
|
Change From Year-Ago Revenue |
19.3% |
|
Earnings Beats in Past 4 Quarters |
3 |
Source: Yahoo! Finance.
Will Synchronoss Technologies disappoint again?
In recent months, investors have had mixed views on Synchronoss' earnings prospects. They've cut their fourth-quarter estimates by a penny per share, but they've boosted their full-year 2016 projections by a nickel per share. Nevertheless, the stock has continued falling, with declines of another 19% since late October.
Synchronoss Technologies' third-quarter results from October show the changing dynamics of the company's two core focus areas. The activation services it provides to companies like AT&T to get people onto their mobile networks showed solid revenue growth of 11% from the year-earlier quarter. Yet the biggest growth came from its cloud services, where sales jumped 31%. Synchronoss now gets more than half of its revenue from the cloud, and that's consistent with the strategic direction the company has set for itself.
Synchronoss still sees a big role for activation services. In January, it announced it had enhanced its activation services platform, making it more accessible and easier for carrier clients to distribute to their mobile customers. Synchronoss also sees the offering as an opportunity to cross-sell its customer relationship management systems, allowing clients to expand their relationship with Synchronoss to include not only order management, but also other customer-facing functions.
Yet the future clearly lies in the cloud. Synchronoss announced the commercial launch of its Backup & Transfer product in early January, which allows mobile-service providers to manage the transfer of content from an old device to a newly upgraded device. Synchronoss anticipates that having more of the critical content mobile users have already conveniently located on the cloud will make it more efficient in avoiding long delays at mobile carriers' retail locations in transferring that data from device to device.
The key question for Synchronoss is whether it can keep up its growth rates regardless of the conditions in the mobile-carrier industry. The slowdown in earnings and revenue growth at Synchronoss has been concerning to many long-term investors. It will be critical for the company's new efforts, including its recently launched enterprise business to offer secure mobility solutions to clients, to gain traction and offer some diversification beyond its previous core business.
In the Synchronoss Technologies earnings report, investors should watch for early results from the enterprise and mobile-security fronts to see if they're bearing fruit. Without the growth catalyst from those areas, Synchronoss could remain vulnerable to any weakness in the mobile-carrier arena, and that could keep its stock from finding a way to rebound from its recent drop.
