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It takes a lot to impress Pareteum (TEUM) investors these days.
The provider of mobile networking software and services released its quarterly earnings report on Tuesday, showing strong growth in both revenue and EPS. Revenue grew more than 400% since this time last year, beating analyst consensus revenue by more than 20%. The company saw EPS rise more than 17x, beating consensus by a wide margin. Management also raise guidance by nearly 10%, signalling to investors the company is optimistic that things will continue to get better. In reaction, Pareteum stock fell nearly 4% in Tuesday's trading session.
Nonetheless, Maxim analyst Allen Klee reiterates a Buy rating on TEUM, with a $9 price target, which implies over 90% upside from where shares are currently trading. (To watch Klee's track record, click here)
With the first quarter beating Wall Street expectations, Klee says Pareteum’s performance “supports [his] view that [the company] has hit an inflection point of becoming a much larger and more profitable company.” While organic growth was only 33%, the company’s acquisitions (including Artillium and iPass) “have been integrated and most synergies have been fully captured,” helping revenue surge.
And while current performance is strong, Klee believes Pareteum’s future looks just as solid. He highlights connections, which he calls a “leading indicator of future revenue growth,” rising 441% since last year to 12 million. Furthermore, existing customer continue to buy more services from the company, as dollar-based net expansion rose 144%, indicating that once Pareteum lands a customer, it can expect to generate revenue from that customer in the future.
Another positive is the company’s three-year contracted revenue backlog. Currently at $938 million, Klee says this provides “very good visibility for future revenue.” The company converted more than 100% of its backlog for Q1, much more than the expected 75% -80%, as Klee believes “these results support our thesis that Pareteum offers a simplified solution to connect clients to networks, which is driving market share gains.”
Looking ahead, the analyst is raising his 2019 and 2020 estimates “based on strong momentum,” while believing that “demand for Pareteum’s solutions comes from a compelling, one-stop-shop” for network connectivity. Klee also expects the company to grow organically, but also through its Artilium and iPass acquisitions. Overall, Klee expects “the stock to get revalued at higher levels” as “Pareteum transforms into a larger and profitable SaaS and communications service provider.”
All in all, despite yesterday's fall, Pareteum stock is on a roll so far in 2019, up 180% in less than five months. Analysts are excited for the company's future, and the recent earnings report shows reason why. TipRanks analysis of five analyst ratings shows a Strong Buy rating, with all five analysts recommending Buy. The $8.00 price target represents a 71% increase from current levels.