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On Wednesday, Needham began coverage on shares of Bandwidth Inc. (NASDAQ:BAND) with a Buy rating and set a price target of $20.00, representing nearly 50% upside from the current price of $13.55. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, despite falling about 38% over the past six months. The research firm’s new coverage was announced following a strong first quarter performance by the company.
The endorsement from Needham comes as Bandwidth showcases growing free cash flow (FCF) and EBITDA margins, with InvestingPro data revealing a robust free cash flow yield of 18% and EBITDA of $24.92 million in the last twelve months. Needham’s analysis suggests that these factors will contribute to sustained growth in the company’s Enterprise Voice segment, which is expected to improve the company’s overall margins, currently at 37.4% gross profit margin.
Bandwidth’s competitive edge, according to Needham, lies in its unique offerings such as the Maestro operating system and its global voice network. These advantages are seen as key drivers for Bandwidth to capture market share from traditional telecommunications companies. With revenue growth of 24.5% in the last twelve months and analysts expecting profitability this year, the company shows promising momentum. For deeper insights into Bandwidth’s financial health and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers 8 additional exclusive tips and detailed valuation metrics.
Despite a conservative update to its guidance due to macroeconomic uncertainties, Bandwidth delivered a robust performance in the first quarter of 2025. Needham anticipates that Bandwidth will outperform its revenue and EBITDA projections for the remainder of the year, propelled by strong momentum in voice AI applications.
The $20 price target set by Needham is based on an enterprise value to free cash flow (EV/FCF) multiple of approximately 9 times. This valuation reflects the firm’s confidence in Bandwidth’s financial prospects and market position.
In other recent news, Bandwidth Inc. reported impressive financial results for the first quarter of 2025, surpassing earnings and revenue expectations. The company achieved an earnings per share (EPS) of $0.36, outperforming the forecast of $0.26, while revenue reached $174 million, exceeding the anticipated $169 million. Bandwidth has also raised its full-year revenue and EBITDA guidance, projecting revenue between $745 million and $760 million and an EBITDA of $87 million. The company’s strategic focus on expanding its AI and messaging services continues to support its growth trajectory. Additionally, Bandwidth’s performance in the enterprise voice sector has been highlighted as a significant growth driver, with strong customer demand for its Maestro platform. Analyst firm William Blair noted the company’s robust pipeline and increasing million-dollar-plus annual revenue deals. Furthermore, Bandwidth’s partnerships with large managed service providers (MSPs) have been emphasized as a key component of its go-to-market strategy, enhancing its ability to secure large and complex enterprise transformations.
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