Is Bandwidth Stock A Buy?

As a major cloud equity in today’s tech market, Bandwidth (BAND) is getting some amount of attention from traders. 

The Bandwidth company is in the business of CPaaS or Communications Platform as a Service. It provides software platforms for unifying messaging, and services that can optimize SIP or perform migrations for call routing in a centralized environment.

Bandwidth APIs for voice and data are useful in telecommunications, allowing for cross-platform messaging across different mobile environments.

Bandwidth also boasts the only tier one network of its kind, a network which can use settlement–free peering to reach any other Internet-connected network around the world.

Essentially, Bandwidth is one of many companies that operate on the basis of offering new cloud services. Cloud services really took off within the past decade as a new way to provide functionality over the web. The CPaaS space is one that investors are keeping an eye on now, as competing messaging venues compete for use.

Bandwidth is not a brand-new company – it was founded in 1999, and began publicly trading in 2017, where its equities were originally around $20 per share. In 2020, its shares were valued at around $65 per share. Within a year share prices more than doubled in value.

And Bandwidth operates in more than 60 countries around the world, with over 700 employees which invites the question whether right now is the time to buy?

Is Bandwidth Stock A Buy?

Some analysts place Bandwidth in their top three tech holdings: “Given the fast-evolving communication landscape, Bandwidth lies at the heart of a massive movement,” wrote Nicholas Rossolillo near the end of last year, noting that other stocks in adjacent spaces, such as Twilio (TWLO) and Zoom (ZM), may be overbought, with BAND as a less discovered equity, looking at share price vis a vis trailing 12-month sales.

Others have been less enthusiastic, arguing that although 30 hedge funds held BAND in the third quarter of 2020, it wasn’t a top holding for hedge fund managers.

Still, the somewhat common holding of Bandwidth stock in hedge funds is a positive sign to some that retail interest will follow.

As for landmark corporate events, the recent acquisition of Voxbone for just over $500 million is a feather in Bandwidth’s cap.

The process took a year, but in November of 2020, as analysts announced its completion, insiders guessed that the deal might enhance in in-house operations: a unified software platform for scaling communications apps and tasks, expanded SIP and E911 integrations, and tools for faster deployment, to name a few.

Functions like real-time number porting and instant rollback make BAND a player in the game of CPaaS and unified platform builds.

Another line item on the company’s CV is a collaboration with North Carolina State University, where partners looked into fraudulent traffic patterns in the insidious practice of robocalling.

For cell phone holders who feel beleaguered by anonymous telemarketing, the company gets a bit of a halo, and the project adds to Bandwidth’s reputation for thought leadership in areas closely related to its offerings, which can’t be bad.

In addition, there are some positive fundamental tailwinds, too. Bandwidth is known for having good cash flow and a self-funding approach. The company enjoyed $230 million in revenues as of quarter four of 2020, with 30% year-over-year gains in the third quarter.

It Won’t Be Smooth Sailing For Bandwidth

One of the major risks of investing in any CPaaS platform is that this particular sector is going through rapid change.

Innovation disruptors are bombarding this part of the industry with ideas, in order to quickly move the ball and make new things possible when it comes to unified messaging and communications.

CPaaS, not to mention UCaaS and CCaaS, are relatively untapped spaces, but companies are moving into them quickly.

Bandwidth Competes With Giant Twilio

In the CPaaS market, Bandwidth has a lot of competitors. There’s the likes of Vonage, Twilio (TWLO), and RingCentral, as well as OneCloud and others.

Looking at the panoply of cloud-related microservices, platforms and public, private or hybrid cloud tools is evidence of the highly complex landscape.

Many of these competitors are also taking on their own projects to innovate in the field. There’s MessageBird, where the company’s “programmable conversations” promise to integrate messaging on platforms like WeChat and Telegram.

There’s also VoxImplant and its AI-powered IVR, a game-changer in an era where “dumb” IVR is widely seen as a roadblock to the future of the voice interface. It’s this kind of powerful disruption that will move markets, and any company that wants to be in the vanguard of tech stocks must have something up its sleeve.

Is Bandwidth Stock A Buy? The Bottom Line

Continued upward growth is going to depend on whether Bandwidth’s specific CPaaS products and initiatives are going to be vastly relevant in tomorrow’s business market.

The question isn’t whether cloud will continue to be a phenomenon. Companies will continue to adopt cloud services. The question is which APIs and which tools will form the basis for this kind of innovation moving forward.

Many of the fundamentals around Bandwidth look good, but it will be helpful to see what direction the company takes in terms of new products and services and updating and modernizing its CPaaS solutions.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.