Global software and services company Synchronoss Technologies, Inc.’s (SNCR) solutions are used by more than 200 businesses worldwide, including by the likes of Verizon Communications Inc. (VZ) and AT&T Inc. (T). Its shares traded higher on June 25 following its pricing of a $100 million public offering of common stock. The company plans to use the offering’s proceeds to redeem its Series A convertible participating perpetual preferred stock and to pay down its revolving credit facility. Its stock price has soared 46.5% since hitting its 52-week low of $2.35 on June 21, 2021.

However, SNCR has lost 24.9% so far this year and 9.5% over the past three months to close Friday’s trading session at $3.53. This can be attributed primarily to its weak financials in the first quarter (ended March 31, 2021) and poor profitability. The company also continues to face intense competition from top players in the software space, such as SAP SE (SAP) and Oracle Corporation (ORCL). 

Furthermore, SNCR is currently searching for a new CFO because its current CFO, David Clark, is expected to step down from his role on August 9, 2021. So, SNCR’s near-term prospects look uncertain.

Click here to check out our Software Industry Report for 2021

Here’s what we think could shape SNCR’s performance in the near term:

Strategic Collaborations

On April 22, SNCR announced a partnership with Telkomsigma, which is the IT arm of Telkom Indonesia Group, to deliver the Synchronoss Personal Cloud Solution to Indonesian universities. Allstate Protection Plans also selected the Synchronoss Personal Cloud solution to integrate it into select device protection plan offerings. With mobile devices serving as repositories for several personal data and important documents, this collaboration is expected to help safeguard a customer’s total mobile ecosystem. So, SNCR could potentially  continue  seeing  increasing demand for its solution.

Weak Financials

For the fiscal first quarter, ended March 31, 2021, SNCR’s top line declined 15.1% year-over-year to $65.50 million. The company’s non-GAAP net loss for the quarter came in at $14.24 million, compared to $2.33 million in  net income in the prior-year quarter. Its non-GAAP gross profit decreased 11.9% year-over-year to $37.37 million. SNCR’s non-GAAP loss per share was  $0.33 in the quarter compared to EPS of $0.06 in the year-ago period.

Unfavorable Analyst Estimates

Analysts expect SNCR’s revenue to decline 12.8% for the current quarter, ending June 30, 2021, to $66.74 million, and 4.4% in 2021 to $278.79 million. The company’s EPS is expected to decline 212.5% in the current quarter and 325% for the quarter ending September 30, 2021. Also, its EPS is expected to remain negative in its fiscal years 2021 and 2022.

POWR Ratings Reflect Uncertain Near-Term Prospects

SNCR 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. SNCR has a C grade for Momentum. This is justified given its 25.2% gains over the past month but 22.9% loss over the past six months.

The stock has a C grade for Growth, which is in sync with analysts’ expectations that its revenue and EPS will decline in the coming months. It also has a C grade for Stability.

SNCR has a D grade for Quality. This is consistent with its negative values for trailing-12-month ROCE and ROTA versus  the 6.86%  and 3.22% industry  averages, respectively. Its trailing-12-month EBITDA margin is also negative compared to the 14.35% industry average.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated SNCR for Sentiment and Value. Get all the SNCR ratings here.

SNCR is ranked #79 of 127 stocks in the Software – Application industry.

Better than SNCR: Click here to access 26 top-rated stocks in the same industry.

Bottom Line

While SNCR is expected to benefit in the 5G era, relying on its numerous offerings, such as personal cloud and secure mobility, its financials are still weak. The company’s EPS and revenue are expected to decline in the current quarter, ending June 30, 2021. So, we believe it’s better to wait before betting on the stock.

Click here to check out our Software Industry Report for 2021

Want More Great Investing Ideas?

7 SEVERELY Undervalued Stocks

9 “Must Own” Growth Stocks for 2021

Stock Market Outlook for 2nd Half of 2021

5 Ways to Beat the S&P 500