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Bandwidth: The Coronavirus Demand Surge Has Now Been Proven

May 04, 2020 9:57 AM ETBandwidth Inc. (BAND)1 Comment
Gary Alexander profile picture
Gary Alexander


  • Shares of Bandwidth shot up nearly 10% after the company reported stellar first-quarter results.
  • The company's revenue growth soared to 29% y/y, accelerating more than ten points quarter-over-quarter from Q4.
  • Among Bandwidth's key clients is Zoom, which has seen a surge in usage since the lockdowns began.
  • Increased usage among Bandwidth's install base has driven net retention rates to a sky-high 121%.

One unexpected stock that has risen to all-time highs during the coronavirus - and not beset by security woes or misleading user counts like Zoom (ZM) - is Bandwidth (NASDAQ:BAND), one of Zoom's backend service providers. The CPaaS company, a smaller competitor to Twilio (TWLO), has seen its revenue growth and customer retention rates soar to record heights in the midst of a lockdown that has upended most other industries. Prior to Bandwidth's first-quarter earnings release this week, we were able only to speculate that Bandwidth's exposure to Zoom and other API-driven services that have risen in usage since the lockdowns would swing Bandwidth's growth skyward. Now, that thesis has been proven, and Bandwidth jumped 10% after reporting Q1 results:

Data by YCharts

We have to stress the idea that not all services that are seeing an uptick in usage will necessarily generate more revenue. We know this to be the case with several of Facebook's (FB) products - though the use of Facebook Messenger has risen, Facebook isn't necessarily driving a proportion increase in Messenger's monetization. Ditto for Zoom, who hundreds of millions of free conference participants won't have to pay the company a penny.

But for Bandwidth, increased usage directly translates into higher revenue, thanks to its usage-based pricing - a key driver of the bullish thesis for Bandwidth that I laid out in March when shares were ~30% lower. Bandwidth prices per API connection - with prices starting, for example, at $0.005 per outbound message and $0.01 per minute of outbound call time. In other words, the fact that Bandwidth charges per message/call means that Bandwidth is a direct beneficiary of our surging digital activity since the lockdowns began.

Now approaching $90, Bandwidth is at all-time highs, and a far cry from the underappreciated ~$20 levels at which the stock was

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I am/we are long BAND. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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