Phunware, Inc. (PHUN) in Austin, Tex., is a pioneer of Multiscreen-as-a-Service (MaaS), a fully integrated enterprise cloud platform for mobile, and has made several partnerships and acquisitions. The stock has gained 330.7% in price over the past month to close yesterday’s trading session at $4.35. The shares had soared more than 1,000% on October 22 to hit their 52-week high of $24.04, due mainly to speculation that PHUN would play a significant role in former U.S. President Donald Trump’s latest attempt to launch a social media platform.

However, no reports have yet been published to confirm that PHUN would help develop Trump’s platform. In addition, according to an SEC filing by the company on October 26, it has registered a common stock shelf offering for roughly $48.50 million worth of its shares. This led to a decline in investor sentiment.

The stock is currently trading 81.9% below its 52-week high. The company also remained unprofitable in its latest reported quarter. So, PHUN’s near-term prospects look bleak.

Click here to check out our Cloud Computing Industry Report for 2021

Here are the factors that could shape PHUN’s performance in the upcoming months:

Partnerships and Acquisitions May Not Be Enough to Drive Growth

PHUN partnered with Cooper Lighting Solutions on October 12 to integrate its MaaS with Trellix. In August 2021, the company partnered with HID Global to integrate and offer its Smart Workplace Solution, and collaborated with Cox Communications, Inc. to bring its Digital Front Door solutions to Cox Business healthcare customers.

Furthermore, on October 19, PHUN acquired Lyte Technology, Inc., a fast-growing provider of high-performance computer systems, for $3.32 million. This is expected to take a toll on its already weak financials, however. Moreover, these developments had minimum or no effect on its share price, representing investors’ pessimism.

Weak Financials

For the second quarter ended June 30, 2021, PHUN’s net revenues decreased 35.1% year-over-year to $1.44 million. The company’s gross profit decreased 78.4% from the same period last year to $312,000. Its operating loss increased 41.2% year-over-year to $4.19 million, while its net loss came in at $8.29 million, up 136.2% year-over-year. Also, its loss per share was t $0.12, representing a 50% year-over-year rise.

Unfavorable Analyst Estimates

Analysts expect PHUN’s revenue to decrease 18.1% year-over-year for the quarter ended September 30, 2021, and 17.6% in its fiscal year 2021. Its EPS is expected to remain negative this year and next year. Also, Wall Street analysts expect the stock to hit $1.88 in the near term, which indicates a potential 56.8% decline.

POWR Ratings Reflect Bleak Prospects

PHUN has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, PHUN has an F grade for Stability, which is consistent with its 15.32 beta.

The stock has an F grade for Value, which is in sync with its 81x and 66.05x respective forward EV/S and P/S, which are higher than the 4.17x and 4.13x industry averages.

PHUN has an F grade for Quality, consistent with its negative trailing-12-month ROCE, ROTC, and ROTA, versus the 8.29%, 4.86%, and 3.51% industry averages.

PHUN is ranked last among 59 stocks in the Software – Business industry. Also, click here to access PHUN’s ratings for Growth, Momentum, and Sentiment as well.

Bottom Line

PHUN’s shares have plunged since hitting their 52-week high in the absence of fundamental strength. Furthermore, analysts expect its revenue to decline in the near term and the company to remain unprofitable. So, we think the stock is best avoided now.

How Does Phunware (PHUN) Stack Up Against its Peers?

While PHUN has an overall POWR Rating of F, one  might want to consider investing in Software - Business stocks holding an A (Strong Buy) rating, such as SS&C Technologies Holdings, Inc. (SSNC) and CSG Systems International, Inc. (CSGS).

Click here to check out our Software Industry Report for 2021

PHUN shares rose $0.33 (+7.59%) in premarket trading Wednesday. Year-to-date, PHUN has gained 245.24%, versus a 23.15% rise in the benchmark S&P 500 index during the same period.

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.

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