Why Sequans Communications Shares Got Destroyed Today

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What happened

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Shares of Sequans Communications (NYSE: SQNS) have gotten crushed today, down by 35% as of 11:20 a.m. EDT, after the company revised its guidance for the third quarter that just closed. Sequans is now expecting significantly less in top-line revenue.

So what

Revenue in the third quarter is now expected within a narrow range of $11 million to $11.2 million, down from a prior forecast of $15 million to $17 million in sales. Gross margin should be over 43%, an improvement from the previous guidance of over 40%.

On a non-IFRS basis, Sequans now expects a net loss of $0.06 to $0.07 per "share/ADS," slightly worse than the prior outlook of $0.05 to $0.07 per share in adjusted losses.

Now what

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Sequans attributed the shortfall to "greater-than-expected weakness from emerging markets for broadband-related products, changes in customers' forecasts due to excess channel inventory for broadband products in the United States, and a delay in concluding the terms of a project related to a vertical market." The broadband business is expected to remain weak throughout the rest of the year, but the company hopes to return to growth in 2018, driven by the Internet of Things (IoT) market.

"We believe the long-term growth drivers of our business, particularly for IoT, remain in place despite these near-term headwinds," CEO Georges Karam said in a statement. Sequans reports full third-quarter results on Oct. 31.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.