Getting The BAND Together: 3 Analysts Rate Bandwidth

Bandwidth Inc BAND, a cloud-based, software-powered communications platform-as-a-service, or CPaaS, company, offered 4 million shares in a recent IPO at $20 each. 

With the quiet period expiring Tuesday, sell-side analysts offered their takes on the company and its prospects.

An Emerging Tech Company With High Execution Risk

KeyBanc Capital Markets analyst Brent Bracelin sees Bandwidth as an emerging technology company, albeit one that carries a high degree of execution risk. The company's growth investments could result in operating losses over the next two years, the analyst said. 

Bracelin initiated coverage with an Overweight and $29 price target on the basis of a favorable risk/reward scenario.

The coupling of voice APIs with a dedicated IP voice network is a main competitive differentiator for the company, Bracelin said. 

Baird Positive On CPaaS Market Opportunity

Baird analyst William Power said he is positive on the CPaaS market opportunity. Bandwidth is well-positioned to accelerate growth over the next few years, thanks to its enterprise focus, growing voice use cases and network advantages, Power said.

The analyst said he's positive about the rise of voice as an interface, with devices such as Amazon.com, Inc. AMZN's Echo and Alphabet Inc GOOGLGOOG's Home as catalysts. Voice calling from these devices could drive a "significant growth opportunity" for Bandwidth, Power said.

See also: Blue Apron, Yogaworks Race To The Bottom Of 2017's IPO Heap

Competition, unproven revenue growth acceleration, negative operating margins in the near term and a lack of international presence are risks to the stock, according to Baird. 

The firm initiated coverage of Bandwidth with an Outperform rating and $28 price target.

Bandwidth's Value Proposition Underappreciated

Morgan Stanley analyst Meta Marshall said Bandwidth's value proposition is underappreciated, even as it is positioned to gain smarket share due to its ownership of both its software platform and network. 

"It has built a competitive moat by virtue of offering its software platform on top of a nationwide IP voice network it spent 10 years and $100 million-plus building," the analyst said.

This allows Bandwith to offer a cost-effective, flexible and responsive solution, drawing "demanding" customers like Google, Microsoft Corporation MSFT, Amazon and Cisco Systems, Inc. CSCO, Marshall said. 

"We believe that as Bandwidth moves from bootstrap mode to investment mode, its value proposition should allow it to grow meaningfully from its $150 million in revenue (in 2016)," the analyst said. 

Morgan Stanley initiated Bandwidth with an Overweight and $28 price target.

The Price Action

On listing at $21.06 on Nov. 10, Bandwidth shares gained about 6 percent to $21.19 on its debut. Although the shares closed below their offer price on two sessions, they have since moved higher.

Bandwith closed Tuesday up 1.48 percent at $22.70. 

Related Link:

Roku On Wall Street: Did The Stock Fare Better Than Other Recent IPOs?