Bandwidth Inc.

BAND Details

Bandwidth Inc. (NASDAQ: BAND) is a cloud-based communications platform-as-a-service (CPaaS) provider that enables businesses to create, scale, and deploys voice and messaging communications services on any mobile app or connected device. Revenue is generated through monthly service fees for its software APIs, payments for services such as SIP trunking, data reselling, and a hosted Voice-over-Internet Protocol service (VoIP), traffic generated by other service carriers, SMS registration fees, and other associated product lines.

Latest News:

• Expansion in Services Portfolio: BAND announced a crucial step forward in the future of the enterprise contact center with Genesys, a global cloud leader in customer experience orchestration, on January 26, 2022. With its inclusion in the market-leading Genesys Cloud CX platform, BAND is expanding its range of market-leading DuetSM solutions, which enable companies to unbundle complex telephony from their communications platforms into the contact center area.

Q3FY21 Results:

• Boost in Topline: Total revenue increased by 54.13% to USD 130.64 million in Q3FY21 (ended September 30, 2021) from USD 84.76 million in Q3FY20, principally attributable to a 45.57% rise in CPaaS revenues.
• Rise in Active CPaaS Customers: The number of active CPaaS customers at BAND increased by 57.47% in Q3FY21 to 3,173 from 2,015 in Q3FY20.
• Decent Balance Sheet: BAND ended the quarter with a cash position of USD 321.82 million and total debt of USD 479.57 million.

Key Risks:

• Customer Concentration Risk: Currently, enterprise clients account for 100% of the company's revenue. As a result, losing any of its essential customers may negatively impact its bottom line.

 Outlook:

• Q4FY21 Estimates: As of November 08, 2021, BAND indicated that it expects total revenues for Q4FY21 to be about USD 115.7-120.7 million, with CPaaS revenues of roughly 94.5-99.5 million. It also forecasted Non-GAAP EPS of approximately (0.15) – (0.11).
• FY21 Estimates: The company also anticipated its total revenues for FY21 to be between USD 480.5 and 485.5 million, with CPaaS revenues ranging from 407.0 to 412.0 million. It also forecasted Non-GAAP EPS in the range of 0.74 – 0.78. 

 Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

BAND's share price has fallen 53.20% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 53.42 to USD 196.70. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 42.45. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 73.82.

Considering the significant correction in the stock price in the past nine months, strong top-line performance, growth in CPaaS customers, encouraging outlook, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 60.45, up 4.93% as of January 31, 2022, at 11:30 AM ET.

Three-Year Technical Price Chart (as of January 31, 2022; 11:30 AM ET). Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.