INAP Earnings Preview
Posted on April 29, 2010
Even though I do not like to bet on earnings, with INAP’s earnings coming out next week, I thought I’d review the company’s outlook quickly.
Basically, my main premise with regards to INAP in 2010, on the financial side, is that comparisons year-over-year for at least the first two quarters will be very favorable. Notably, the company lost $0.13 per share and lost $1.22 per share in Q1-09, and Q2-09, respectively, due to impairment and other charges. Given that the company basically broke even in Q4-09 on a lower revenue base, I’m confident that the company’s upcoming quarters will show substantial improvement over the dismal results in the first half of 09. The improving financials, coupled with INAP’s success with their data center expansion, should increase interest in the shares, and support a higher stock price.
Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in INAP. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
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This site may include market analysis and we may own shares in the stocks mentioned in our reports. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
Curious about your thoughts on NENG. You long ago recommended that, but the shares fell into the pennie. Yet recently, the shares have surged over 600% and the company seems to be growing, with impressive new design wins and customers like Dell. Gross margins are still very low of course, Do you still have a position in NENG?
Hi Wants,
I’ve sold NENG, though it may still go alot higher due to the company’s business momentum. The reason I sold is because of the gross margin issue you have mentioned. It doesn’t seem as if there is any scale in their business, and so I question the long-term strategy the company is pursuing, i.e. sales growth at any cost. However, Wall Street loves top-line revenue growth, and generally overvalues sales growth for a wide variety of reasons. In addition, NENG seems to be attracting some investment banks, which may try to raise money for the company (see the S-3 filed with the SEC). These banks will undoubtedly hype up NENG prior to a capital raise, if there should be one.
So overall, while I am not bullish on NENG’s business per se, the stock, like most publicly-traded stocks, may not reflect this negative view for a long while, and may in fact reflect a more positive, albeit erroneous, view.
Thanks - makes good sense. Are you still bullish on Vonage or did you sell that as well after its big run-up? That was another incredible call by the way. Which of the issues you are covering know are you most enthusiastic about over the next year? I always value your knowledge and insight.
Best,
Wants
Yes, I’m still bullish on VG and still hold a core position. I did sell some shares, of course, when it went up from $0.40 to $2.50 some time ago. The key thing for VG now is some indication of how they will deal with their high-interest debt. Will they refinance or not, and when? Without the debt issue, the stock would be much higher. I’m confident the debt situation will be worked out with time, which is why I’m bullish on the shares.