Needham maintains AudioCodes stock Buy rating, $12.50 target

On Tuesday, Needham reaffirmed its Buy rating on AudioCodes (NASDAQ:AUDC) shares, maintaining a price target of $12.50. The endorsement comes as analyst Joshua Reilly takes over coverage of the company, expressing confidence in its market position and growth prospects. According to InvestingPro data, the stock appears undervalued with a PEG ratio of 0.23, indicating attractive pricing relative to its growth potential. Additional analysis from InvestingPro shows the company maintains a healthy gross profit margin of 65.31%.

Reilly highlighted AudioCodes’ strategic placement within the Microsoft (NASDAQ:MSFT) Teams Voice ecosystem, emphasizing the company’s competitive edge in Session Border Controllers (SBCs) for Teams customers. He also noted the potential for AudioCodes to expand its revenue streams by offering new products in Conversational AI and other areas. InvestingPro analysis reveals the company’s strong financial position, with a current ratio of 2.09 indicating robust liquidity to support its growth initiatives.

The transition of customers to a subscription-based model is expected to reduce revenue volatility and boost profit margins, according to Reilly. He pointed out that even though the overall growth of Teams users has decelerated, reaching 320 million globally, there is an anticipated increase in the 22 million Public Switched Telephone Network (PSTN) users as they shift from traditional phone systems to Teams Voice with the PSTN add-on.

The Needham analyst’s outlook suggests a stable future for AudioCodes, as the company adapts to changing customer preferences by offering more software-centric solutions over hybrid appliance deployments. This move is seen as a positive step towards sustainable growth and profitability for the firm. For deeper insights into AudioCodes’ financial health and growth potential, InvestingPro subscribers can access comprehensive analysis, including 7 additional ProTips and detailed valuation metrics in the Pro Research Report.

AudioCodes’ role in the expanding Teams Voice market and its efforts to innovate in the field of Conversational AI are central to Needham’s positive stance. The company’s strategic focus on subscription models aligns with industry trends favoring recurring revenue streams and could lead to improved financial performance in the long term.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.