On Friday, Morgan Stanley adjusted its stance on Bandwidth Inc. (NASDAQ:BAND), downgrading the stock from Equalweight to Underweight. Accompanying this downgrade, the firm also reduced the price target for Bandwidth shares to $15.00, a decrease from the previous target of $18.00.
The revision in the stock's rating and price target is based on expectations of revenue growth due to the upcoming election cycle in 2024. However, the analyst indicated that the majority of this growth is likely due to pass-through surcharges, which they believe are already reflected in the stock's more than 25% year-to-date increase.
The firm suggests that the recent surge in Bandwidth's share price presents a difficult scenario for the company's 2025 estimates. This is because the models currently assume a reacceleration in organic growth, which may be challenging to achieve.
The price target adjustment to $15.00 from $18.00 is informed by the firm's outlook that, despite potential revenue increases in 2024, the current valuation may not be sustainable going into 2025. The analyst's statement emphasized the potential overestimation of growth prospects built into the stock's current trajectory.
Morgan Stanley's downgrade to Underweight reflects a cautious perspective on Bandwidth's future performance, particularly in relation to the company's stock price and growth estimates for the year 2025. The firm's analysis points to the need for a reevaluation of expectations as the market has already priced in significant growth factors.
In other recent news, Bandwidth Inc. has been the subject of various analyst reports following a robust first-quarter performance in 2024. KeyBanc increased the price target for Bandwidth shares to $32, maintaining an Overweight rating, after the company reported significant growth in its Messaging business and an unexpected surge in political messaging revenue. The firm also highlighted the potential for an increase in the adjusted sales metric for the calendar year 2024.
In parallel, Baird raised its price target for Bandwidth to $25, citing the company's solid quarterly results and the positive impact of strategic financial management. The firm maintained a Neutral rating on the stock, expressing caution about becoming too optimistic following recent gains.
Concurrently, Canaccord Genuity maintained its Buy rating on Bandwidth and increased its stock price target to $40, following record quarterly revenue and the highest first quarter adjusted EBITDA in the company's history.
In addition, Bandwidth has raised its full-year outlook for both revenue and profitability, attributing the positive financial performance to significant growth in its direct-to-enterprise customer category, particularly through its Maestro platform.
Despite these developments, the company announced the departure of Chief Operating Officer Anthony Bartolo. These recent developments underscore ongoing healthy trends in digital communication and Bandwidth's strategic focus on expanding gross margins and free cash flow.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.