En baisse de 45 % en 2021, cette action cloud pourrait bientôt commencer à grimper

Bandwidth (BAND +12.74%) was in strong form on the stock market last year as the demand for communications platform-as-a-service (CPaaS) solutions skyrocketed amid the novel coronavirus pandemic. Organizations lined up to purchase Bandwidth's offerings to enable connectivity with their remote workforces, triggering a sharp acceleration in the company's business.

However, 2021 has turned out to be a disappointing year for Bandwidth investors. The stock is trading close to its 52-week lows after losing nearly 45% of its value so far this year. But this steep decline doesn't seem to be justified as Bandwidth has maintained its terrific revenue growth this year.

BAND data by YCharts

Bandwidth looks set to sustain its impressive growth when it releases its third-quarter results on Nov. 8, which could inject new life into the stock. Let's see how the company is expected to fare in Q3.

Bandwidth is set to deliver another strong quarter

Bandwidth last week released preliminary third-quarter results that turned out to be better than its Q3 guidance that was released in August. The company says it expects third-quarter revenue of $131 million, which would be a 54% increase over the year-ago period and easily ahead of the guidance range of $123.6 million to $124.6 million.

Bandwidth says its Q3 CPaaS revenue is likely to come in at $107.4 million, a 46% jump over last year and just above the higher end of its $106.1 million to $107.1 million guidance range. The company's third-quarter revenue will be impacted to the tune of $0.7 million due to a recent distributed denial of service (DDoS) cyberattack that led it to offer credits to customers and caused a loss in transaction volumes.

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Additionally, Bandwidth points out that the DDoS attack is likely to affect its full-year CPaaS revenue in a range of $9 million to $12 million, including the third-quarter impact mentioned above. As a result, the company will be adjusting its full-year outlook to account for the loss of revenue caused by this one-off incident.

Bandwidth was expecting full-year revenue of $484.8 million to $486.8 million as per its second-quarter earnings report, which would have translated into 41.5% growth over 2020's revenue of $343.1 million. It is worth noting that the company's original full-year revenue guidance that was issued in February this year had called for revenue between $460.4 million to $464.4 million.

Bandwidth increased its expectations as the year progressed thanks to the growing adoption of its products, a bigger customer base, and the acquisition of Voxbone, which was completed in November 2020. The company's active customer base had increased 61% year over year in the second quarter to 3,051. Bandwidth had also witnessed an increase in spending by active customers, as is evident from its dollar-based net retention rate of 114% in the second quarter.

Bandwidth points out that the dollar-based net retention rate "compares the CPaaS revenue from customers in a quarter to the same quarter in the prior year." The higher that number is over 100%, the better it is for Bandwidth as it means that its existing customers have increased their adoption or extended the usage of its products.

As such, Bandwidth's full-year revenue outlook may not take a hit on account of the cyber attack since it is on track to deliver a better-than-expected Q3 performance that could have allowed it to increase the guidance once again. In all, Bandwidth looks set to finish 2021 on a strong note; don't be surprised to see the company maintain its impressive momentum next year and beyond.

Solid long-term prospects make it an enticing bet

The CPaaS market that Bandwidth operates in is expected to clock an annual growth rate of 34% through 2026, according to Mordor Intelligence. So, the company is growing at a faster pace than the broader market thanks to the swelling customer base and the increased spending on CPaaS services.

Analysts expect Bandwidth's revenue to increase nearly 19% in 2022, though it won't be surprising to see the company do better than that as has been the case so far this year. One of the reasons why that may be the case is because of the shift to a hybrid work model that involves working from the office and remotely. Gartner estimates that 53% of the workforce in the U.S. will work remotely by 2022, while Europe is also expected to witness a similar share.

As a result, the demand for Bandwidth's communication APIs (application programming interface) that allow companies to embed voice and text capabilities into their apps should keep getting better. That's why now may be a good time to go long Bandwidth while its stock is beaten down. Bandwidth is trading at 4.88 times sales, which is a huge discount to last year's sales multiple of 12.7, giving investors looking for a cloud stock an enticing opportunity to buy this fast-growing player.