Market Overview

Lake Street Capital Initiates Pareteum, Turnaround Positive

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Communications provider Pareteum Corp. (NYSE: TEUM) exhibits well-executed turnaround, underappreciated growth and tremendous share upside.

The Analyst

Lake Street Capital Markets analyst Eric Martinuzzi initiated coverage on Pareteum with a Buy rating and a $5 price target.

The Thesis

In Monday’s note, Martinuzzi outlined the company’s evolution over the past three years, including some highlights such as:

  • The addition of new Executive Chairman, Hal Turner and the multi-phased turnaround effort in 2015.
  • In 2016, the company sold ValidSoft, changed names from Elephant Talk to Pareteum, and revolutionized the business structure and focus to a new communications platform as a service. Later that year, the company returned to profitability and hired CEO Vic Bozzo.
  • 2017 featured a new customer base with 26 contracts covering 45 countries, as well as a strengthened management team and 5 percent growth.
  • In 2018, revenue grew over 60 percent as the company expects to close on the acquisition of Artilium, which will bolster the company’s competitive profile, Martinuzzi said. According to the note, this model assumes the deal closes on Sept. 30.

According to Martinuzzi, one of the potential investment risks surrounding Pareteum stock involves revenue concentration.

“As of Q2’18 two customers (Vodafone and Zain) made up 75% of total revenue. This is down from 97% in Q2’17. While this is a significant exposure, we do not believe either relationship is at risk. We expect the implementation of new accounts in backlog to reduce the risk over time.”

Price Action

Pareteum shares closed up 4.9 percent at $2.97 Monday.

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Latest Ratings for TEUM

DateFirmActionFromTo
Oct 2019DowngradesOutperformPerform
Oct 2019DowngradesOutperformMarket Perform
Oct 2019DowngradesBuyHold

View More Analyst Ratings for TEUM
View the Latest Analyst Ratings

Posted-In: Eric Martinuzzi Lake Street Capital Markets mobile network ValidSoftAnalyst Color Price Target Initiation Analyst Ratings

 

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