Procore signs multi-year strategic collaboration agreement with AWS
On Monday, a B.Riley analyst maintained a Buy rating and a $14.50 price target for Ooma, Inc. (NYSE:OOMA), a smart communications platform for businesses and consumers. The analyst's sales projection for the second quarter of fiscal year 2025, ending in July, is $63 million, aligning with the consensus and the company's guidance range of $62.5 million to $63.0 million.
The firm anticipates Ooma's earnings before interest, taxes, depreciation, and amortization (EBITDA) to reach $5.0 million, representing a 7.9% margin, which is slightly higher than the consensus of $4.7 million. Management aims to expand the EBITDA margin to 9% in the second half of the fiscal year. The pro forma earnings per share (EPS) estimate stands at $0.14, consistent with both market expectations and the company's own guidance of $0.13 to $0.14.
Ooma is expected to report a 7.5% year-over-year increase in second-quarter sales, including a final adjustment of approximately 10,000 seats at its largest customer. Despite facing growth challenges, the company is nearing the completion of orders for the first 10,000 AirDial boxes and has expanded its reseller partner network to over 15 with a recent launch in Canada.
The company's wholesale unified communications platform, 2600Hz, is making significant strides in technology synergies and market interest, including a new CPaaS customer with potential to become one of Ooma's top revenue contributors.
Business customers, including small and medium-sized businesses as well as enterprise clients, now represent 60% of total subscription and services revenue, with approximately 13% year-over-year organic growth since fiscal year 2023. The analyst expects subscription and services growth to accelerate in the next fiscal year as AirDial and 2600Hz growth catalysts materialize.
Ooma's stock is viewed as having a favorable risk/reward ratio, especially after demonstrating solid execution in the first quarter of fiscal year 2025, with shares trading at 0.9 times the fiscal year 2025 estimated enterprise value/sales compared to the company's five-year average of 1.7 times.
InvestingPro Insights
Recent data from InvestingPro highlights some key financial metrics and analyst insights for Ooma, Inc. (NYSE:OOMA). With a market capitalization of $222.2 million, the company is navigating through a period of anticipated growth, as net income is expected to rise this year. This optimistic outlook is supported by five analysts who have revised their earnings estimates upwards for the upcoming period. The stock, however, has experienced a downturn over the last month, with a price total return of -14.96%.
Despite a challenging growth environment, Ooma's revenue has grown by 8.85% over the last twelve months as of Q1 2025, with a gross profit margin of 61.64%, signaling a strong ability to retain earnings from sales. However, the company is currently trading at a high EBITDA valuation multiple, which could suggest that the stock is priced optimistically in relation to its earnings before interest, taxes, depreciation, and amortization. It's worth noting that Ooma does not pay a dividend, focusing instead on reinvesting earnings back into the company's growth.
For investors seeking more detailed analysis, InvestingPro offers additional tips on Ooma, providing deeper insights into the company's financial health and future prospects. Currently, there are 7 more InvestingPro Tips available for Ooma, which can be accessed for those looking to make an informed investment decision.
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