Roth Capital has initiated coverage on Phunware Inc. (NASDAQ:PHUN) with a 'Buy' rating and $2.50 price target
In a note to clients, Roth's analysts said: "We believe PHUN has positioned itself very well as enterprise customers look to enhance their mobile offering in an increasingly digitized world. PHUN has pioneered the MaaS (Multiscreen-as-a-Service) platform, pivoting to a cloud-based, industry and hardware agnostic platform providing enterprise customers with all the essential tools to succeed on mobile."
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The analysts said they believe Phunware is on the verge of growth inflecting positively in full-year 2021 to around 25% year-over-year and see it accelerating to around 45% in full-year 2022 as demand begins to catch up post-coronavirus, and customer wins stack through strategic indirect sales partnerships that enable greater distribution and scale - in addition to a cryptocurrency angle that could represent optionality.
They noted that Phunware's revenue once one-time in nature is now around 80%-plus recurring, with gross margins approaching low/mid-70%.
The analysts highlighted several catalysts that they think should aid Phunware’s growth including: 1) further enterprise mobile adoption, 2) strategic indirect distribution partners, and 3) a global re-opening. They also said the company's entrée intro cryptocurrency "serves as a call option for its business (and stock) as well".
The analysts noted that while smaller in size, Phunware's growth compares favorably to SaaS (Software-as-a-Service) comparables which trade at a mean EV/sales multiple of around 9.8x/8.1x, respectively.
They said: "Given PHUN’s slightly better growth outlook (and call option on crypto), we believe it should trade at a slight premium to these peers."
The Roth analysts concluded: "We believe PHUN presents a unique opportunity, leveraging its immense customer data set to help enterprise customers engage, manage and monetize their mobile experience at scale."
Contact the author at jon.hopkins@proactiveinvestors.com