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Sphere 3D Corp. (ANY) Plunges on Wider

Shares of Sphere 3D Corp. (NASDAQ:ANY) plunged nearly 6% in yesterday’s after-hours trade following the company reported wider-than-expected loss for the first quarter of 2015. The company’s adjusted loss per share of 18 cents was wider than the Zacks Consensus Estimate of 15 cents loss. Moreover, it compared unfavorably with the year-ago quarter’s breakeven results.

On a GAAP-basis, the company posted a net loss per share of 27 cents compared with a loss of 4 cents reported in the year-ago quarter.

The company’s first-quarter revenues of $20.1 million were marginally higher than the Zacks Consensus Estimate of $20 million. However, it surged nearly 20 times year over year from revenues of $0.9 million reported in the year-ago quarter. The year-over-year growth was mainly driven by the acquisitions of Overland Storage and V3 Systems along with strategic alliances and higher number of deal wins.

The company’s non-GAAP gross profit increased to $6.6 million from $0.5 million in the year-ago quarter, mainly driven by strong top-line growth. However, as a percentage of revenues, non-GAAP gross profit decreased to 32.7% from 56.9% in the year-ago quarter.

Operating expenses came in at $13.6 million versus $1.3 million in the first quarter of 2014. The company posted adjusted loss before interest, taxes, depreciation and amortization of $6.1 million as against earnings of $0.04 million reported in the year-ago quarter.

Sphere 3D ended the first quarter with cash and cash equivalents of approximately $4.4 million compared with $4.3 million in the previous quarter. The company has a long-term debt obligation of $19.5 million at quarter-end.

Our Take

Sphere 3D started 2015 on a soft note incurring wider-than-expected loss in the first quarter. However, we are encouraged with the company’s robust top line which gained from acquisitions, strategic alliances and higher number of deal wins.

We believe that the company’s strategy of growing through acquisitions will drive its revenues. Moreover, its sustained focus on product innovation and strategic alliances will continue to help it in winning more deals.

Nonetheless, increased investment may impact the company’s near-term profitability.

Currently, Sphere 3D carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Apart from Sphere 3D, other stocks worth considering in the technology sector are Barracuda Networks Inc., Computer Task Group Inc. and CoStar Group Inc. All the stocks carry the same Zacks Rank as Sphere 3D.

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