My take on SNCR with no position as of yet:
I was a bit surprised to find that SNCR has been a steadily growing company since 2011 (as far back as I looked). I imagine this has been on the back of their Activation services riding the wave of increasing cell phone usage.
As of the latest quarter, activation services are growing 11% annually. However, cloud services are growing at 31% and are now 50% of their business. As far as I can tell, their cloud services are primarily sold to their existing customer base (carriers such as Verizon).
The stock has taken a hit over fears Verizon is too large of a customer. During the call, the CEO stresses their strong, symbiotic relationship with Verizon.
Their guidance for the next quarter represents 19% revenue growth but only 8% EPS growth.
SNCR will lose 3 pennies in EPS next quarter due to their new partnership with Goldman Sachs. I’d think a few more quarters of this are ahead as they ramp up their product.
I’m considering beginning a position and here are my thoughts as to why.
On their customer concentration, they continue to sign up new carriers as is evidenced by T-Mobile last quarter, their relationship with VZ is strong with a new 2 year contract, they are selling their cloud services to VZ and many others (31% growth).
On their deal with GS, I’m a bit torn here. I like the fact they are continually looking to expand into new verticals, but question the return on investment.
From a market perspective, I don’t see cell phone and cloud usage slowing in the near term, and they seem well positioned as exhibited by their growth in cloud.
I don’t know about their products, but their value proposition appears to be strong. They developed a way to make activation of products easy for OEM/carriers and are attempting to be brand agnostic as far as I can tell. They began their entrée into cloud in 2011 and that is now paying dividends. They seem relatively nimble and smart.
I really don’t know who their competition is, but looked on YahooFinance. I found a few, but none that appeared to cater to cell carriers. Found one that catered to cable companies such as Comcast, but none specific to carriers which seem to be their bread and butter. If anyone understands their competition, I’d love to hear about it.
Finally, now seems to be a good time to invest from a value perspective. Up until 4 to 5 months ago, their PE was generally well above 20. It stands at 17.3 currently.
I’m not sure why this company doesn’t get a bit more following. It’s growth trajectory is a relatively straight line over the past 8 quarters (about 20% annually). One half of their revenue source is growing well and the other half is growing quite fast.
If - and that’s a big if - their partnership with GS in totally secure enterprise mobility pays off, growth may take off even further.