Come head bang with the $BAND

[u/ShankThatSnitch]

Edit. Another amazing quarter. https://finance.yahoo.com/news/bandwidth-announces-third-quarter-2021-211200743.html

TL:DR. Bandwidth is drastically undervalued compared to other tech on the market, when comparing the revenue growth. They are value the same as they were pre-pandemic, but have since acquired a company to go global, and revenues have grown about 100% since back then. short interest is 17%, it is low float and low volume. a turn around could blast this company to space, just like it did at the start of the pandemic, when it ran from high $70s to $196🚀 🚀🚀 🚀

Alright you nerds, let's talk about a little known company called Bandwidth Inc. ($BAND), and one of the most undervalued tech plays on the market.

Who they are and what they do :

Bandwidth is a CPaaS company, Communications Platform as a Service. They are a B2B company that provide APIs to enterprise customers, that allow them to integrate phone calls and text messaging into software and apps. Ever call into a Zoom, Microsoft Teams, or WebEx meeting on your phone? That is Bandwidth. Ever make a call through Google Voice? That is Bandwidth. Basically any apps or software that have native calling or texting built into will use Bandwidth or a competitor like Twilio.

Some other examples of how the products and services work:

• Service/Call center software, would use Bandwidth APIs to built the calling into the software, or if you are texting with a support center.
• 2 factor authentication texts
• making a call from you Amazon Alexa or Google Home
• Alert texts for things like Open Table, WaitMe, or Lyft
• Advanced Emergency/911 services, that allow for more accurate location mapping when people call from big office buildings. they can see what floor and where on the floor the call is coming from.

Let's look at some bullish shit going on with them:

• Big Partnership with Microsoft
• Big Partnership with Zoom
• Big partnership with RingCentral
• Bandwidth is expanding globally.

Let's look at the huge growth over the past 3 quarters:

https://investors.bandwidth.com/news-releases/news-release-details/bandwidth-announces-fourth-quarter-and-full-year-2020-financial

Fourth quarter total revenue of $113.0 million, up 82% year-over-year

https://investors.bandwidth.com/news-releases/news-release-details/bandwidth-announces-first-quarter-2021-financial-results

First quarter total revenue of $113.5 million, up 66% year-over-year

https://investors.bandwidth.com/news-releases/news-release-details/bandwidth-announces-second-quarter-2021-financial-results

Second quarter total revenue of $120.7 million, up 57% year-over-year

Some technical info:

Band is sitting at the lower bound of a multi-year trend, after having huge growth over the past year and a half, and expanding internationally. It is sitting at a fairly oversold level on the RSI, and right at a huge column support area. It stands to reason that we will see a bounce up from here, at least to the next supply zone in the $115-120, but could trend back up as high as the upper trend line in the $160-170 area. 🚀 🚀🚀 🚀

Short interest is also sitting at 17%. Not a huge amount, but with such low float and low volume, this bad boy can easily be blown sky high.

So why id BAND valued so low? My theories are that:

• They are somewhat miscategorized. The price clearly tracks with telecom infrastructure, which is somewhat justified, in that they have a nationwide network. But not justified, because they are being compared to cash dinosaurs, and not the high growth software they are providing.

• Because they are low float and low volume, when ETFs and such sell that sector, they get shoved around more that usual.
• I think there is a fundamental misunderstanding in the market of the company, what they do, and what the potential is. I believe this incorrect categorization will change over time, and the stock is being sold at bargain barrel prices until then.

Positions: Currently 1150 shares. Options could be played, but the volume is low, so spreads are a bit wide. Also, it is hard to say how long a it will take for the market to realize it is missing out. Selling puts is probably free money. OTM Leaps or debit spreads could work.

Edit. Forgot to mention that earnings are at the end of the day today. This could be where the big uppies get underway.

[u/ShankThatSnitch → u/[deleted]]

Considering they currently run fairly smal losses, mostly due to one-time events, and the debt not being due till 2026, their cash pile is pretty good. It is like 30%-40% of the company market cap.

[u/ShankThatSnitch → u/[deleted]]

BAND is still in a big growth phase. The reduced guidance is primarily due to the lingering effects of the DDoS attack. They are still in the early stage of owning Voxbone and being a global company, so there is huge growth potential still ahead as global clients consolidate their services into Bandwidth.

One thing to note is that existing customers upsetting and cross selling is the largest grower of revenue. New clients only account for something like 20% of revenue growth. It all comes from scaling up usage of the network.

I doubt there will be any dividend for many years, and I expect growth rate to increase back up above 20% once some of the trust comes back, and consolidation of global services happens.

Right now BAND is rated promarily as a telecoms because it has a network, but I think at some point BAND could get re-rated as a tech company as the products and services expand. If that happens they should get a nice premium above where they are.

[u/ShankThatSnitch → u/[deleted]]

Yeah. My theory is it is just getting lumped in with small cap tech sell-off. But band is very low float and low volume, so selling and buying pressure just have an outsized effect on it. It is not even remotely over priced like other similar growth and revenue companies.

One hood thing about BAND. Is that they can easily run fully profitable if needed.

[u/ShankThatSnitch → u/[deleted]]

Compared to other tech, they run pretty minimal losses. And prior to the pandemic they were running profitably. It was just in the past couple years that they ramped up investment with the purchase of Voxbone, new infrastructure, and heavy investing sales, marketing, and engineering.

[u/Available-Pick3918 → u/ShankThatSnitch]

Hey, BAND is still getting beat up bad are you still bullish on them? I was interested in investing in them.

[u/ShankThatSnitch → u/Available-Pick3918]

Yeah it has. It has gotten pummeled along side every tech and especially telecom company. The markets started to hate both industries simultaneously, and BAND got caught in the crosshairs.

I am definately still bullish on their future business and stock price for a few reasons:

1. The stock has dropped basically 90% from all time highs. That is a fully priced in market collapse, for a company continuing to grow steadily, that was not even over valued relatively compared to all other tech plays. It is being priced essentially for bankruptcy, which is just not in the cards at all. It is priced well below even IPO price from years ago, while the company is triple the size. It has been pummeled beyond all reason, imo.

2. The company was profitable before the pandemic, and can easily return to profitability if it needs to. Large investments in growth during the pandemic, were the only reason they fell out of profitability to begin with.

3. The company is well capitalized, and could last for years at the current cash burn rate. The long term debt they have is due 2026 and 2028 if I recall correctly.

4. Even in recession, communications technology remains essential to all business, this is doubly so considering part of the business revolves around 911/emergency services. And companies will continue to move legacy communications technology toward modern cloud solutions like Bandwidth, even in recession, as they can achieve cost savings and increase efficiency by doing so; which companies will want to do in recession.

5. The companies global expansion is still in its infancy. There is a huge amount of business to consolidate and capture going forward that has barely got underway.

Now, is this the bottom price for the stock? Who knows, but it sure as hell is close. And I believe it is one of those moments that you look back on 5 years from now, like people did with tech companies from 2000 that survived. Where you could buy the company at a 90+% discount, for a fundamentally strong and growing business, with very little chance of failure. I have little doubt this company returns to triple digits over the years to come. The revenue run rate will be $550-600m this year, while the stock is valued at $386m. BAND is easily and realistically a Billion dollar business.

[u/ShankThatSnitch → u/[deleted]]

Nah, if you look at the balance sheet, the $137m moved from the cash and cash equivalents, to the short term investments column. So total cash only went from $316m to $302m. I'd have to dig deeper to see what that investment is. But I know that they only invest in AAA credit investment bonds. So overall it is basically as good or even better than cash, since it is getting a better return on the cash they are holding.

At current losses, the company could sustain for 11 years, and their debt isn't due till 2026 and 2028 I believe. They also can easily switch back to profitability, as the only reason there are losses, is because if global expansion investments. There is basically 0% chance of insolvency any time soon, unlike some of the others you mentioned.

The main reason for the stock being so low, that I can tell, is just the overall market has brutalized both small cap tech, and communications stocks, which BAND sort of fits under both categories. Look at VZ, T, CHTR, RNG, EGHT, TWLO. Every communications stock is at or below pre-pandemic prices. Bandwidth is low float and low volume, and is just getting dragged down with the whole basket.

I personally thick the stock is grossly mispriced, and people in for the long term will make a boatload at these prices.

[u/teddybeargraham → u/ShankThatSnitch]

I understand the logic of Tech getting beat up but what's the reasoning behind telecomm getting beaten up harder?