Bandwidth Inc.

BAND Details

Bandwidth Inc. (NASDAQ: BAND) is a global corporate cloud communications firm that provides a diverse set of software Application Programming Interfaces (APIs) for phone, messaging, and emergency services. BAND is the industry's first Communications Platform-as-a-Service (CPaaS) provider that owns and maintains a national IP voice network in the United States. Its revenue is derived from the monthly service fees levied for its software APIs, payments for services such as SIP trunking, data reselling, a hosted Voice-over-Internet Protocol service (VoIP), and from traffic generated by other carriers, SMS registration fees and other allied product lines.

Clarification on Recent DDoS Attack: On October 05, 2021, BAND made a statement addressing a recent distributed denial of service (DDoS) attack, a malicious effort to interrupt the regular traffic of a targeted server, directed at the company and other VoIP providers on September 28, 2021. The firm claimed that its mitigation measures have been successful. Its network has been stable and running at normal levels since the evening of September 29, despite periodic interruptions. It will continue to work with its customers and partners to ensure the viability of the VoIP ecosystem.

H1FY21 Results: The company reported a sharp 61.13% uptick in revenues to USD 234.14 million during H1FY21 (ended June 30, 2021) compared to USD 145.31 million during H1FY20, owing to the Voxbone S.A. acquisition (on November 02, 2020) and increased demand for CPaaS services. Net loss for H1FY21 reduced to USD 12.24 million from USD 21.70 million in H1FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 309.62 million with a total debt of USD 472.47 million. During H1FY21, BAND's active CPaaS customers surged by 60.58% YoY to 3,051.

Key Risks: A sizable percentage of BAND's income is concentrated among a small number of enterprise clients. Therefore, if it loses even one of its top clients, orders for its services will be considerably reduced, impacting its financial situation. Furthermore, the company's operations rely on third-party suppliers for fiber, transmission electronics, network components, and colocation facilities. As a result, failure to deliver these critical parts from these suppliers might significantly affect BAND's operations and financial position.

Outlook: BAND expects Q3FY21 revenue to range from USD 123.6 – 124.6 million, including CPaaS revenue of USD 106.1 – 107.1 million as of August 05, 2021. It also predicts its non-GAAP EPS to range between USD 0.07 – 0.09. For FY21, the estimated sales range is USD 484.8 – 486.8 million, with CPaaS revenue of USD 418.4 – 420.4 million and non-GAAP EPS of USD 0.71 – 0.75.

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.

BAND Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BAND's stock price has fallen 52.67% in the past twelve months and is currently leaning towards the lower band of its 52-week range of USD 76.80 to USD 196.70. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.67. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 110.20. Considering the significant correction in stock price, a surge in top-line, increase in active customers, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 89.37, up 0.57% as of October 15, 2021, 1:59 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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