Based in China, Borqs Technologies Inc. (BRQS) is focused primarily on software, development services and products. It has gained nearly 34% over the past six months thanks to the growing hype around the 5G market.
BRQS also signed an agreement in December to cooperate in the Huzhou South Taihu New Area’s 5G Industrial Park Project. The agreement helped the stock hit a $3.07 peak on February 11, but it has been on a downtrend since.
BRQS is currently trading 82.4% below its 52-week high of $7.85. The tension between the U.S. and China and, as part of that, a threat of delisting in the U.S. has adversely affected BRQS. The company was on the brink of being delisted but in the end it complied with Nasdaq listing requirements .
Here’s what we think could shape BRQS’ performance in the near term:
Expanding Market Reach
Borqs India, a subsidiary of BRQS, successfully demonstrated a NextGen TV Android smartphone in November to One Media 3.0, a wholly owned subsidiary of Sinclair Broadcast Group, Inc. (SBGI). The phone is based on ATSC 3.0. BRQS also received a purchase order last August worth more than $15 million to supply mobile point of sale (POS) Internet of Things (IoT) devices to the India market.
Last October, BRQS announced plans to join with SkyCentrics, a Northern California company that is the leader in open standard power grid optimization in the U.S., to manufacture and deliver CTA-2045 technology-based products. BRQS also formed a strategic partnership with Juniper Networks, Inc. (JNPR) last September to collaborate on bringing the latest Android ultra-rugged products to the U.S. and international markets.
Low Valuation but Poor Profitability
In terms of trailing-12-month enterprise value/sales ratio, BRQS’ 0.84x is lower than the industry average 4.63x. In terms of trailing-12-month price/sales ratio, the stock’s 0.54x is also lower than the industry average 4.32x. However, its trailing-12-month gross profit margin of negative 10.1% compares poorly to the industry average 48.4%. BRQS’ trailing-12-month return on total assets of negative 90.5% also compares poorly to the industry average of 2.8%.
Struggling to Generate Funds for 5G Development
BRQS signed agreements with institutional and individual investors on February 25 for the sale of $20 million in two-year convertible notes. The company expects to use the proceeds for the development of its next generation 5G products. However, while it is still struggling to generate funds for the development of its 5G products, China and the United States are already competing for 6G dominance.
POWR Ratings Don’t Indicate Enough Upside
BRQS has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BRQS has a C grade for Momentum. This is justified given that the stock has gained 32.7% over the past three months but lost 13.2% over the past month.
Also, it has a D grade for Quality, which is in sync with its lower-than-industry profitability ratios.
We have also graded BRQS for Sentiment, Stability, Growth, and Value. Get all of BRQS’ ratings here.
Of 86 stocks in the D-rated China group, BRQS is ranked #56.
Better than BRQS: Click here to access 13 top-rated stocks in the same industry.
BQRS has gained 39.8% over the past nine months based on several product developments and increased market reach. However, given the factors discussed here, its prospects appear to be hanging by a thread. So, we think it is better to assess the company’s forthcoming financials before betting on its shares.
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BRQS shares were trading at $1.37 per share on Tuesday morning, down $0.01 (-0.72%). Year-to-date, BRQS has gained 38.82%, versus a 5.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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