On the surface, iPass (NASDAQ:IPAS) appears to be a compelling investment. A mobile connectivity and location-technology provider, IPAS stock is levered toward an ultra-high demand industry.
Investors prize leading companies like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon.com (NASDAQ:AMZN) not just for their primary businesses, but also for their useable analytics.
On that front, iPass delivers the goods. Proclaiming its expertise in wireless tech over the last 20 years, the company specializes in seamless data transmissions between Wi-Fi and cellular signals. This isn’t just a wonky mobile-communications exercise. By connecting the two signals, iPass facilitates superior user location accuracy.
And why might a business want this information? It’s all part of the next generation of advertising and marketing. Through understanding exactly how people go about their daily routines, companies can better gauge their advertising effectiveness.
In other words, this isn’t about merely announcing customer engagement. Rather, companies can now tailor their advertising presence until they’ve hit the perfect formula. It’s a groundbreaking concept, so you can see why IPAS stock enjoyed speculative trading sentiment.
That argument was driven home even deeper just recently. The tech firm announced a deal with an unnamed major multinational, U.S.-based financial services company. Under the agreement, iPass will provide wireless connection management and Wi-Fi connectivity for the financial company’s employees.
Utilizing iPass’ SmartConnect innovation, the target employees can work uninterrupted as their devices transition between available signals. A prior pilot program implied a notable boost to worker productivity, and reduced downtime from communications-based glitches.
The deal represented a breakthrough for the relatively diminutive iPass. As a result, the markets rewarded IPAS stock with a massive 21% move.
But does the enthusiasm mean you should load up on shares? I’ll spare you the drama: You need to pass on IPAS stock.
IPAS Stock Is a Proven Money Loser
To best illustrate how I feel about IPAS stock, I’ll reference popular culture. During an old broadcast of “Pawn Stars,” pawn-shop owner Rick Harrison admonished his son Corey for purchasing an exotic speedboat.
The elder Harrison bemoaned that while boats are sexy, they’re also money pits. In the end, things worked out perfectly, perhaps because “Pawn Starts” isn’t exactly 100% non-scripted. But here’s the thing: Your portfolio isn’t a reality TV show.
IPAS stock is just like that hotrod speedboat that Corey hastily purchased. The company’s marketing print looks amazing, and I’m sure the actual tech is viable. But the problem is that management just hasn’t translated that to any success.
You can look at it from the immediate perspective. On a year-to-date basis, IPAS stock is down almost 58%. That ghastly figure accounts for the nearly 21% swing recently.
Broaden your horizon, and you’ll discover that over the last five years, IPAS stock has been an unmitigated mess. Okay, let me backtrack: Shares had an explosive year in 2016. But if you snoozed, you took a sizable loss.
Recall that two years ago, iPass traded for around $16. Today, you can acquire a position at a little more than $2 a pop. I’ll let you do the math.
Contrarians might raise the argument that shares have hit bottom. I’m not sure about that. Early-bird investors thought the bottom was $50 in August 2004. Then the bottom was $9 months after the 2008 financial collapse.
If it weren’t for the deal, IPAS stock would sell for less than a city bus ticket.
The Financials Don’t Make Sense, Either
As if you needed more evidence to steer clear from IPAS stock, just glance at the financials. The only positive standout I see is a favorable cash-to-debt ratio. Other than that, iPass is a crisis stock. Its margins are horrifically bad, as is revenue growth. According to the company’s Altman Z-score, it’s distressed.
Now, I don’t have anything against crisis stocks. But even for me as a cryptocurrency investor, iPass is tough to swallow. When looking at its income statement, I don’t see any rationale for optimism. Revenues keep ticking down, and if things don’t improve, 2018 will record at least a multiyear low. Margins are also exploding in the wrong direction, despite management cutting overhead.
At this point, I usually cover other financial metrics like free cash flow. But what’s the point? I’ll give iPass this: It’s negative, but consistently so.
I suppose the only other positive I can discuss is the insider transactions. To its credit, and I use that term loosely, management has dived into IPAS stock.
But here’s why I’m gun-shy: They all got creamed. The most recent insider transaction was a buy on Mar. 5 of this year. That position is down almost half. I might be crazy, but I’m not iPass crazy.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
