Is This the No. 1 Telecom Stock to Own in April? Leading telecommunications company Ooma (OOMA) achieved solid fourth-quarter and full-year 2023 results and is well-poised to witness continued growth in the upcoming years, supported by strength in its diversified portfolio...
By Mangeet Kaur Bouns •
This story originally appeared on StockNews
Leading telecommunications company Ooma (OOMA) achieved solid fourth-quarter and full-year 2023 results and is well-poised to witness continued growth in the upcoming years, supported by strength in its diversified portfolio of products and services. However, given the ongoing macroeconomic challenges, is it wise to invest in this telecom stock this month? Read on to find out….
After an impressive performance in fiscal 2023, Telecom giant Ooma, Inc. (OOMA) is set to achieve continued growth in fiscal 2024 and beyond, driven by the sustained demand for its product and services offerings, industry-leading innovation, and other strategic initiatives, including increasing market share through partnerships and acquisitions.
Given its solid fundamentals and promising growth prospects, this telecom stock is worth owning this month. In this piece, I will discuss several reasons why I am extremely bullish on OOMA.
With a $316.50 million market cap, OOMA offers communications services and related technologies for businesses and consumers in the United States and Canada. The company's products and services include Ooma Office, a cloud-based multi-user communications system for small and medium-sized businesses, and Ooma Connect, which delivers fixed wireless internet connectivity.
In addition, the company provides Ooma Enterprise, a unified-communications-as-a-services (UCaaS) solution; Ooma AirDial, a plain old telephone service; and Ooma Telo, a home communications solution. Strong demand for its offerings, continued innovation, and strategic acquisitions enabled OOMA to deliver a solid performance in the fourth quarter and fiscal year 2023.
For the fiscal year ended January 31, 2023, OOMA's total revenue increased 12% year-over-year to $216.20 million. Its subscription and services revenue rose to $199.10 million from $175.90 million in fiscal 2022 and was 92% of total revenue, mainly driven by the growth of Ooma Business and the acquisition of OnSIP.
Also, the company's adjusted EBITDA stood at $17.40 million, compared to $15.60 million in the previous year.
Eric Stang, Chief Executive Officer of OOMA, said, "We enter our fiscal 2024 year with good cash flow, no debt, and multiple growth initiatives under way designed to drive profitable growth."
"These initiatives include continued investment in Ooma Office to serve small and medium sized customers, in Ooma Enterprise targeted at select verticals and customers who have custom requirements, in international expansion, and in our new AirDial solution targeted at replacing ageing and expensive copper POTS lines," Stang added.
For the first quarter of fiscal 2024, OOMA expects total revenue in the range of $56.40 million to $56.90 million. The company's non-GAAP net income is expected to be in the $3.40-$3.70 million range, while it expects non-GAAP net income per share in the range of $0.13 to $0.14.
For the full year 2024, the telecom company expects total revenue in the $235.50-$238.50 million range. Also, it expects non-GAAP net income and non-GAAP net income per share in the range of $14.50-$16.50 million and $0.55-$0.63, respectively.
Shares of OOMA have gained 5.9% over the past nine months to close the last trading session at $12.51. Moreover, Wall Street analysts expect the stock to hit $19.00 in the near term, indicating a potential upside of 51.9%.
Here is what could shape OOMA's performance in the near term:
Robust Financials
In the fourth quarter of fiscal 2023, OOMA's total revenue increased 12% year-over-year to $56.50 million, while its non-GAAP gross profit rose 16.8% from the year-ago value to $36.35 million. Its non-GAAP operating income came in at $4.02 million, up 25.4% year-over-year. The company's adjusted EBITDA grew 26.5% year-over-year to $5.05 million.
Furthermore, OOMA's non-GAAP net income rose 26.8% year-over-year to $4.10 million, and its non-GAAP net income per share was $0.16, an increase of 23.1% year-over-year. In addition, the company's cash inflows from operating activities came in at $3.30 million, up 85.2% year-over-year.
Impressive Historic Growth
OOMA's revenue has grown at a 12.6% CAGR over the past three months. Also, the company's total assets have increased at a 36.4% CAGR over the same time frame.
Favorable Analyst Estimates
Analysts expect OOMA's revenue for the fiscal 2024 first quarter (ending April 2023) to come in at $56.50 million, representing an increase of 12.3% year-over-year. The consensus EPS estimate of $0.14 for the ongoing quarter indicates a 13.3% year-over-year increase. It's no surprise that the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
In addition, OOMA's revenue and EPS for the fiscal year (ending January 2024) are expected to increase 9.9% and 8.5% year-over-year to $237.57 million and $0.59, respectively. Also, analysts expect the company's revenue and EPS for fiscal 2025 to grow 9.7% and 28.3% year-over-year to $260.54 million and $0.75, respectively.
POWR Ratings Show Promise
OOMA's strong fundamentals are reflected in its POWR Ratings. The stock's overall A rating translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. OOMA has a grade of A for Growth and Sentiment, in sync with its robust financials and optimistic analyst expectations. In addition, the stock has a B grade for Stability. Its 24-month beta of 0.79 justifies its Stability grade.
OOMA topped among 19 stocks in the Telecom-Domestic industry.
Beyond what I have stated above, we have also given OOMA grades for Value, Quality, and Momentum. Get access to all OOMA ratings here.
Bottom Line
OOMA delivered solid results in the fourth quarter and full-year 2023. Furthermore, the company is well-positioned to continue its business momentum in fiscal 2024 and beyond, driven by solid demand for its offerings, industry-leading innovation, and strategic partnerships and acquisitions.
Given OOMA's outstanding financial performance and promising growth prospects, we think investing in this telecom stock could be wise now.
How Does Ooma, Inc. (OOMA) Stack Up Against Its Peers?
OOMA has an overall POWR Rating of A. One could also check out these other stocks within the Telecom-Domestic industry with an A (Strong Buy) or a B (Buy) rating: Spok Holdings, Inc. (SPOK), Verizon Communications Inc. (VZ), and IDT Corporation (IDT).
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OOMA shares were trading at $12.60 per share on Tuesday morning, up $0.09 (+0.72%). Year-to-date, OOMA has declined -7.49%, versus a 8.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
The post Is This the No. 1 Telecom Stock to Own in April? appeared first on StockNews.com
