Entering text into the input field will update the search result below

Bandwidth: Take Advantage Of The Dip To Buy At A Discount To Peers

Mar. 01, 2021 6:10 PM ETBandwidth Inc. (BAND)35 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Bandwidth have inexplicably fallen ~20% from all-time highs after the company reported fiscal fourth-quarter results.
  • The company saw revenue growth in excess of 80%, a reflection of strong pandemic-driven internet usage and the contribution from Bandwidth's acquisition of Voxbone.
  • The company's dollar-based net revenue retention rate also soared above 130% in the quarter, putting Bandwidth above most other SaaS peers.
  • The stock's <8x forward revenue multiple sits at a meaningful discount to most other software companies.
  • Looking for a helping hand in the market? Members of Daily Tech Download get exclusive ideas and guidance to navigate any climate. Get started today »

With the recent rout in tech stocks owing to concerns over valuations and rising interest rates, some companies have been unfairly punished despite sitting at reasonable valuations already. One stock I've loaded up more on during the recent correction is Bandwidth (NASDAQ:BAND), a CPaaS (communications platform as a service) provider that helps companies build text-and-voice capabilities into their applications and is a smaller, lesser-known rival to Twilio (TWLO).

This software stock has enjoyed a very strong 2020. One of the best aspects about Bandwidth is that, like Twilio, the company collects revenue from its customers based on usage: that is, per text or per minute of voice call. The fact that we've increased our usage of the internet and our mobile devices during the pandemic means that Bandwidth's revenue also proportionally rises: a circumstance made clear not only by Bandwidth's surging revenue growth, but also by its net revenue expansion rates, a closely-watched metric in the software sector.

Yet despite these strengths, and a very strong fourth-quarter print released at the tail end of February, Bandwidth still remains ~20% off highs. This creates a really good buying opportunity in a very strong, if underappreciated, stock:

To me, there are a number of tailwinds for Bandwidth that are driving the bullish thesis for this stock, and why I think a near-term recovery is appropriate for the company:

  • Growth is stellar, and like Twilio, Bandwidth prices its services based on usage. Bandwidth's 80%+ revenue growth (though supplemented by an acquisition) is tremendous. Usage-based pricing is the key behind many stocks that saw exponential revenue and stock price growth in 2020, including Twilio and companies like Fastly. Bandwidth's pricing follows a similar model, with voice calls costing $0.01 per minute and SMS messages costing $0.004 per message, for example (corporate clients would get customized rate packages that

For a live pulse of how tech stock valuations are moving, as well as exclusive in-depth ideas and direct access to Gary Alexander, subscribe to the Daily Tech DownloadHighly curated focus list has consistently netted winning trades of 40%+.

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.

Recommended For You

Comments (35)

I totally agree with you. All analysts who focus on price at the expense of the quality of the business are simply poor analysts. These type of analysts focus on the earnings reports. They simply copy and paste tables and figures from these earning reports with zero analysis of their own. Stocks are cheap for a reason. I always go for the best of the breeds and I am will to pay a higher price. The best of the breeds have a wide moat. My 2 cents.
You always focus on price, but the right way is to focus on quality. This is why your recommendations perform so bad.
No, I am not jealousy. I just feel pity for you Out_on_a_limb for your losses. Losing your hard earned money in this fashion is bad indeed. I hope next time you will do much better to avoid or reduce your losses. Thanks
Out_on_a_limb profile picture
@kalu0003, I feel sorry for you. All the opportunities you've lost! Even your brain. Do you think the Fed will let interest rates run very high? You've lost your mind.
Are there some folks who are bleeding heavily due to their heavy investment style in growth stocks? calm down. This is just the beginning. Hopefully you are learning a good lesson in stock investment. Rates are still too low and when they really start jumping off - you know the story. Thanks
Out_on_a_limb profile picture
@kalu0003, you are so happy to vent out your frustration. I pity you. If you think the future is old economy stocks, stay invested there. You'll still loose at the end. There is no immanent justice. Jealousy is a horrible thing.
If we consider the FY2021 expected sales ($463.3M), with todays price around $131 this means a P/S = 6.2 which is extremely low compared to peers. Buy the dip!
Think we hit low 120's thats when I am going long
04 Mar. 2021
@kiwicarrotcake Looks like you're right..
@Taek Gonna trade with all the other incredibly pricey SaaS stocks. Holding up surprisingly well..would have thought low 120's today for sure.
@kiwicarrotcake Nvm there it is
As long as rates keep ripping and negative sentiment keeps building towards tech...uh-oh.
Trading below 200 MA, seems that the only way is down.
It seems investing in BAND is dead money based on the forecasted results. Thanks
weak forecasted organic growth, if we exclude expected contribution from Voxbone, organic revenue is forecasted to grow at only 11% next year. Probably conservative but still pretty weak
@Chrisaoun I calculate 22% forecasted organic growth since last year included 2 quarters of voxbone. This seems very conservative with recent beats and organic growth above 50%.
@rammbler65 only the 4th quarter has voxbone revenue, total amount is 17.5 mil. Acquisition closed beginning of 4th quarter
@Chrisaoun Thanks for the correction. Somehow, I read 2 months as 2 quarters. With this correction, I calculate about 14% organic growth, a little higher than your estimate. But either way, if the market believes this guidance, that would explain the drop. But their low guidance doesn't seem to make sense give recent organic growth of 63% in the 4th quarter (excluding voxbone) and customer growth.
no comment whatsoever on the -.81 cents loss of earnings that exceeded expectations by a wide margin---come on man.
Wantingtotravelagain profile picture
This is nothing but momentum trading...you benefit on the way up and take the hits on the way down...chart says it all...on two occasions it bounced at 144ish...BAND is in this channel until otherwise noted on the upside or downside....take a breath as it isn't always about the fundamentals. Can't have it both ways...
Out_on_a_limb profile picture
@Wantingtotravelagain, you are looking at the chart merely in weeks. Not valid. The stock is building a base, as it jumped quickly from the prior level (in the 50's).
Wantingtotravelagain profile picture
@Out_on_a_limb are you feeling ok? Band has been in a wide range for 6 months (180s to 140s). I don't consider that weeks nor base building The swings have been wide and very much momentum driven as of the last six months. If the macros continue to breakdown so won't your base building idea. Hope you are correct but not your typical base building activity
Out_on_a_limb profile picture
@Wantingtotravelagain, no need to disparage. The plateau started in September, which is nothing . A base can build over several years. Stocks are for the long haul, otherwise you'll lose due to interim volatility. But to each one his own.
Gary Alexander,
what is the advantages of owning both TWLO and BAND? Can BAND dislodge TWLO? or Can TWLO dislodge BAND? Is BAND the best of the breed in this space? Is it rational to buy a second class investment simply because it is cheap? Thanks
I reached the same conclusion at higher prices. With the current outlook suggesting continued strong growth and a recent stellar earnings report, the drift lower at this multiple is extremely baffling. Every analyst I respect is extremely bullish but it keeps getting cheaper. Either the market is temporarily irrational or the we're all missing something here, hopefully the former.
The chart is going from bad to ugly and I can’t find a reason either. If it can’t recover on days like today than when can it? I am more inclined to be a seller than a buyer. Not shot but if market repeats last week it might be a potential short.
@Gary Alexander What are the chances of BAND being acquired and whom might be interested in doing so?
waterman101 profile picture
Nice summary. Very compelling opportunity here, no clue why this is trading wildly cheap. I've been buying BAND over the last couple weeks as well as KLR today. The multiples being this low are nonsense in a 30%+ CAGR space. I mean, c'mon. C'mon.
what is the advantages of owning both TWLO and BAND? Can BAND dislodge TWLO? or Can TWLO dislodge BAND? Thanks
@kalu0003 It is the same advantage as if you buy Amazon and Walmart or Costo, or if you buy Micron and WDC or any other microchip manufacturer, i.e. there is no specific advantage only you need to believe in this market. It can be an idea to buy 50/50; actually, BAND is cheaper than TWLO and has the advantage of the infrastructure, TWLO is said to be more aggressive in sales...
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.