Ooma Inc. (OOMA) provides communications services and related technologies to businesses and residential customers in the United States and Canada. The company’s products include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial.
For approximately $9.75 million in cash, OOMA recently acquired Junction Networks Inc., which conducts business as OnSIP, a cutting-edge supplier of cloud-based phone and unified communications services for small and mid-sized organizations, from Intrado Corp.
The acquisition of OnSIP is projected to be accretive to OOMA's adjusted EBITDA beginning the fourth quarter of 2022 and contribute to the company's profitability and cash flows as operational synergies are realized.
Also, Ooma AirDial, an OOMA drop-in replacement for obsolete copper-wire phone lines, has been selected Best Endpoint Product for 2022 in the publication UC Today's renowned UC Awards.
The stock has gained 13.1% over the past three months and 7.9% over the past month to close its last trading session at $13.49.
Here's what could shape OOMA's performance in the near term:
Robust Financials
For the second quarter ended July 31, 2022, OOMA's total revenue grew 11.9% year-over-year to $52.65 million. Its gross profit surged 15.4% from the prior-year quarter to $33.82 million. The company reported a net income of $338 thousand, compared to a net loss of $439 thousand in the second quarter of 2021. Its adjusted EBITDA came in at $3.98 million.
Strong Growth Prospects
Street expects OOMA's revenue to rise 12.7% year-over-year to $216.74 million in fiscal 2022. In addition, its EPS is expected to grow 47.7% per annum over the next five years. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
The only Wall Street analysts that rated OOMA rated it Buy. The 12-month median price target of $23 indicates a 70.5% potential upside.
POWR Ratings Reflect Solid Prospects
OOMA has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. OOMA has a B grade for Growth, Sentiment, and Stability. Favorable analyst estimates justify the Growth and Sentiment grades. In addition, the stock’s beta of 0.64 is in sync with the Stability grade.
Of the 20 stocks in the D-rated Telecom – Domestic industry, OOMA is ranked #1.
Beyond what I stated above, we have graded OOMA for Quality, Value, and Momentum. Get all OOMA ratings here.
Bottom Line
OOMA's robust financials position it well for a significant upside in the near term. Furthermore, the company's strategic acquisition should expand its market reach and help the stock rebound soon. So, the stock could be an excellent investment.
How Does Ooma Inc. (OOMA) Stack Up Against its Peers?
OOMA has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with B (Buy) ratings: Spok Holdings Inc. (SPOK) and Verizon Communications Inc. (VZ).
OOMA shares were trading at $13.45 per share on Monday afternoon, down $0.04 (-0.30%). Year-to-date, OOMA has declined -34.20%, versus a -23.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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