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Communication platform Bandwidth Inc (NASDAQ:BAND) made its public market debut on the Nasdaq in November when it offered about 4 million shares in an IPO.
The Analyst
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Morgan Stanley analyst Meta Marshall downgraded Bandwith from Overweight to Equal-weight and maintained a $40 price target.
The Thesis
Despite shares rising 90 percent since Bandwith's listing, the company still trades at a discount to growth-adjusted comparables, Marshall said in the Monday note. Larger beats are essential to close the gap, the analyst said. (See Marshall's track record here.)
Such earnings beats may not materialize until mid-2019, given that the company is making investments to drive future growth, Marshall said. The analyst continues to favor the company as one of the "leaders in the CPaaS market."
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The growth of current customers, with dollar-based retention rates rising from 111 percent in the third quarter of 2017 to 115 percent in Q1, is encouraging, Marshall said. The analyst is also confident of the existing customer base supporting 20-percent-plus CPaaS growth in 2018, courtesy of ramped up investments.
Morgan Stanley views the stock as one that could outperform if Bandwith grows customers faster than expected; snares a major customer away from competition; and if multiple expansion continues within the stock's comparable group.
"While the group could certainly continue to appreciate, we think it is prudent to take gains until we are more confident that BAND can drive large upside to expectations in 2019," Marshall said.
The Price Action
Bandwidth shares have gained over 64 percent year-to-date.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.