Twilio Has Soared 94% in 6 Months. Here’s Another Incredibly Cheap Cloud Stock That Could Follow Suit and Jump at Least 34%, According to Wall Street.

Key Takeaways:

• Bandwidth reported a 28% year-over-year revenue increase in Q3 2024.
• Earnings per share nearly doubled to $0.43 from $0.23.
• Net retention rate increased to 117%, indicating strong customer spending.
• Analysts expect EPS growth of almost 64% in 2024.
• The stock has a median price target suggesting a potential 34% increase.

Bandwidth’s Impressive Financial Performance

Cloud communications provider Bandwidth has caught the attention of investors seeking the next big opportunity in the tech sector. While Twilio has soared 94% over the past six months, Bandwidth offers a compelling case for significant growth.

In its third-quarter results released in October, Bandwidth reported an impressive 28% year-over-year increase in revenue, reaching a record $194 million. More notably, its earnings per share (EPS) nearly doubled to $0.43 from $0.23 in the same period last year. This strong financial performance suggests that the company is accelerating its growth trajectory.

Growing Customer Adoption

Bandwidth’s success is underpinned by increased adoption of its cloud communications tools. The company’s average annual customer revenue in Q3 2024 rose by 20% to $212,000. Existing customers are not only sticking around but also spending more on Bandwidth’s offerings.

More specifically, the net retention rate—a key metric indicating customer spending—jumped to 117% from 104% the previous year. A rate above 100% signifies that customers are adopting more services or increasing their usage, highlighting the value they find in Bandwidth’s solutions.

Analysts’ Optimistic Projections

Analysts have taken note of Bandwidth’s robust performance. Expectations are high, with projections of EPS increasing by almost 64% in 2024. The midpoint of Bandwidth’s revised revenue forecast stands at $742 million, up from an earlier estimate of $700 million at the start of 2024.

Looking ahead, analysts anticipate that Bandwidth’s earnings growth could accelerate further in 2025 and 2026. If EPS reaches $2.21 in 2026 as estimated, the stock price could potentially more than triple, based on industry earnings multiples.

Market Opportunity and Valuation

Bandwidth estimates its addressable market opportunity at $17 billion in 2023, indicating substantial room for expansion. Despite its strong growth and potential, Bandwidth trades at about 23 times forward earnings, making it cheaper than its peers and a discount to rival Twilio.

Potential for Significant Stock Appreciation

With a 12-month median price target of $22, Bandwidth’s stock could see a 34% jump from current levels. For investors, this presents an attractive opportunity to invest in a company that combines strong financial performance with undervalued stock pricing.

Conclusion

As the cloud communications market continues to grow, Bandwidth is positioning itself as a formidable player with significant upside potential. Investors looking for the next big tech stock may find Bandwidth’s combination of growth, profitability, and valuation compelling.