On April 25, 2019, MobileIron (MOBL) announced its Q1 earnings AMC. The company which develops a cloud-based platform that enables companies to secure and manage mobile applications and content, fell short of expectations. While MobileIron generates much of its revenue from cloud and subscription services, it has yet to capitalize on transitioning its customers from maintenance to subscriptions. According to the CEO, Simon Biddiscombe, only about 5% of their customers have been transitioned. In early trading, MOBL stock was up almost 10% on the day, before settling back down to reality.
Despite an impressive growth in their cloud business of 37% year over year, the company still remains unprofitable. For more evidence of this, one must only look to their financials to see larger picture. Profitability ratio, such as the Return of Equity (ROE), which shows the ability of a firm to generate profits from its shareholders investment, was an astoundingly bad negative 77%. In addition, their operating margin, which measures how much profit is made on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, was a remarkable bad negative 22%.
Even when compared to its peers, MobileIron is far behind the pack. Firms such has Symantec Corp (SYMC) which, despite just recently missed earnings estimates is showing positive signs of growth, or Automatic Data Processing, Inc. (ADP), which was just downgraded by analysts, but has had considerable more consistent revenue, are more in line with this business software sector.
If I haven’t made my opinion clear by now, I am saying current investors should sell while there are still people willing to buy. To savvy investors who are looking to invest, I would suggest that MobileIron may not be the stock for you. It may have a niche product and lots of upside potential, but hopes and optimism won’t put bread on the table. Unless there was to be a change in management, the future outlook of this firm is dicey at best.
Dry Powder 