Spirent shares plunge by almost a third after profit warning
- Spirent shares fell by far the most on the FTSE 250 index
- The telecommunications testing company said many customers were delaying their investments.
- Its order intake during the first nine months of 2023 was 24% lower than last year.
Spirent Communications Stock Its value has plummeted after the company warned that annual turnover would be around 20 percent lower.
The telecoms testing business saw its shares fall 31.3 per cent to 90.1p on Wednesday, making it the biggest faller by far on the FTSE 250 index.
It said current economic conditions were causing many of its clients to postpone investments, thereby affecting the timing of orders and causing worse short-term visibility.
Big drop: Telecom testing company Spirent saw its share price fall on Wednesday
Although the group saw strong demand in the second quarter, this declined in the following three months and the rebound expected in September did not materialize.
Demand for its high-speed Ethernet testing services has been severely affected by increased economic uncertainty in China, one of its largest markets, where the government has scaled back its spending plans.
Additionally, standalone 5G network launches have been “slow,” the company said, due to difficulties related to building and operating a cloud-native core network.
As a result, Spirent’s order intake for the first nine months of the year was 24 percent lower than the same period last year, while revenue is forecast to be around a fifth lower.
The Crawley-based company does not expect its sales performance to improve for the rest of 2023. It also warned that its full-year operating profit will be affected “very materially” by negative operating gearing.
Eric Updyke, CEO of Spirent, said: ‘The near-term order book is not strong enough to support our expectations for the final quarter and our full-year outlook is reduced accordingly.
“Given the lack of certainty in the timing of our clients’ technology roadmaps, we are taking necessary cost actions while taking care to protect those investments that allow us to maximize our long-term structural growth drivers.”
The group is confident that demand for 5G services will underpin future growth, with spending on core networks such as high-speed Ethernet upgrades and cloud computing expected to grow for at least the next four years..
Spirent conducts extensive testing on mobile and Wi-Fi networks, as well as cybersecurity and cloud systems, for some of the world’s most famous technology giants and large enterprises.
Analysts at brokerage Jefferies said: ‘We do not believe there is any structural change in the industry that has reduced demand for the company’s products, and we view the current weakness as cyclical.
“We expect a significant recovery in orders and sales at some point, although there is no visibility on its timing.”
However, the broker has cut its price target on Spirent shares by almost half, from 340p to 195p, reflecting the company’s weaker sales forecasts.