Canaccord Genuity Upgrades Inseego On Rosy Revenue, Growth Projections

Software as a service provider Inseego Corp. INSG has developed new products and an improved cost structure that should drive strong growth, according to Canaccord Genuity. 

The Analyst

Analyst T. Michael Walkley upgraded Inseego from Hold to Buy and raised the price target from $2.25 to $4.50.

The Thesis

Meetings with Inseego's CEO and CFO increased Walkley's confidence in the company's ability to execute on plans and margins, he said in the upgrade note. (See his track record here.)

“We anticipate gross margin should improve as new hardware products replace legacy 4G MiFi products in the mix and 5G products ramp longer-term,” the analyst said. 

Canaccord expects Inseego to up its investments in sales, marketing and R&D tied to growth opportunities such as 5G fixed wireless, mobile 5G, 5G routers and home gateways, Walkley said. 

The analyst forecast improved revenue in light of SaaS deals that are expected to account for 17-percent growth in the next two years.

"With over 1 million global SaaS subscriptions under contract, we believe the enterprise SaaS business has a scaled platform to deliver strong margins and double-digit revenue growth. We believe the aviation vertical is helping drive SaaS growth, as Inseego has aviation wins with two of the top five and three of the top 10 global airlines." 

Inseego's long-term growth potential is the primary driver of Canaccord's updated valuation — and the sell-side firm's 2019 and 2020 estimates "could prove conservative depending on the scope and timing and ramp of new product and customer opportunities," Walkley said. 

Price Action

Inseego shares were rallying 14.33 percent to $3.75 at the time of publication Thursday.

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