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Can Bandwidth's (BAND) Growth Momentum Continue in 2021?

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Shares of Bandwidth Inc. (BAND - Free Report) have surged 149.1% year to date driven by accretive customer base and healthy revenues on the back of a flexible business model. Earnings estimates for the current and next fiscal year have increased a stellar 250% and 369.2%, respectively, over the past year, implying robust inherent growth potential. With solid fundamentals and inherent growth potential, this Zacks Rank #4 (Sell) communication infrastructure provider’s winning streak is likely to continue in 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Growth Drivers

As a leading provider of a cloud-based communications platform, Bandwidth benefits from cost-effective operations. The company capitalizes on a variety of marketing channels to promote its products and services. This reinforces pricing flexibility and provides a significant competitive advantage to build a capital-efficient and customized networking infrastructure. Bandwidth follows a usage-based revenue model that enables it to simultaneously augment its top-line growth and increase subscriber base. The company is witnessing higher demand for work-from-home connectivity solutions amid coronavirus-induced lockdown. Bandwidth believes that its evolving portfolio and accretive customer base are the cornerstones of long-term growth across a diverse set of markets.

One of the primary assets of Bandwidth is the 911 communications services and Internet Protocol voice network, which provides multiple benefits to the enterprise customers. Backed by an avant-garde software platform, the company monitors and resolves network-related issues on a real-time basis. Bandwidth enables enterprises to rapidly scale communications functionalities to a vast range of applications and devices with its easy-to-use software APIs. It supports high user volumes without affecting deliverability and eliminates performance degradation in a cost-effective manner. Bandwidth’s reduced capital expenditure requirements and lower marginal costs enable it to minimize total cost to customers. Continuous innovation on CPaaS offerings allows enterprise customers to have direct access to its comprehensive suite of products and services that cater to the networking requirements of large-scale Internet companies and cloud service providers based in the United States.

Equipped with a dynamic business model, the company has been keen on developing its international offerings. It is undertaking the necessary steps to pursue international expansion opportunities, thereby strengthening its enterprise customer base overseas. Bandwidth established two data centers in Frankfurt and London in 2019 and has been permitted to operate in 13 European countries, which includes 11 members of the European Union, the United Kingdom and Switzerland. With an aim to fortify its communications platform, the company has acquired cloud communications leader, Voxbone, for €446 million. The transaction complements Bandwidth’s product portfolio and enables it to offer a unified software platform to better serve global customers. The integrated offering will facilitate firms to combine voice, video and text communications as part of their digital transition and help transform enterprise cloud communications for superior customer experience.

The stock delivered a positive earnings surprise of 507%, on average, in the trailing four quarters, beating estimates on each occasion. With long-term earnings growth expectation of 21.7%, this stock has enough firepower to hold its ground in the next year.

Key Picks

Some top-ranked stocks in the broader industry are Aviat Networks, Inc. (AVNW - Free Report) , Comtech Telecommunications Corp. (CMTL - Free Report) and Ubiquiti Inc. (UI - Free Report) , each sporting a Zacks Rank #1.

Aviat delivered a positive earnings surprise of 11.8%, on average, in the trailing four quarters.

Comtech delivered a positive earnings surprise of 2%, on average, in the trailing four quarters.

Ubiquiti has a long-term earnings growth expectation of 18.4%. It delivered a positive earnings surprise of 27.9%, on average, in the trailing four quarters.

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