This is why, in Bandwidth's Q4 revenue guidance of $118 million, the company is forecasting a steep sequential decline from Q3 to Q4 - something that doesn't typically happen in Q4, which is typically a quarter that sees lift due to heightened end-user holiday activity.įigure 1. Financially, what this means is that Bandwidth issued customer credits to its impacted clients, and lower usage (both in Q3 and Q4) will weigh on revenue as well. The attacks are frequently organized by ransomware groups that demand a certain dollar amount to lift the attack Bandwidth responded internally without paying a ransom.īandwidth's services experienced a temporary outage. In late September, Bandwidth confirmed that it was the subject of a distributed denial of service (DDoS) attack. Let's start first with the biggest topic on investors' minds recently, and potentially the biggest piece of news to hit Bandwidth in years. In my view, in light of Bandwidth's strong Q3 results and the company's seeming ability to put the DDoS attack behind it, I think investors should buckle up and get ready for a recovery rally in Bandwidth.ĭata by YCharts The impact of the DDoS attack There has indeed been a DDoS (distributed denial of service) attack on Bandwidth's servers that caused a recent outage, though I think the company has contained the risk and the stock price reaction to that catalyst was far steeper than it deserved. It would be a mistake to say that there have been no fundamental drivers to spark the ~50% drop in Bandwidth's stock year to date. This year has been nothing short of Bandwidth's annus horribilis. As end-consumers like you and I use these applications to, say, contact our Uber ( UBER ) drivers, Bandwidth gets paid for each usage. Bandwidth's technology helps developers build communications (talk and text) capabilities at the touch of a finger in their applications. One notable exception here is Bandwidth ( NASDAQ: BAND), a CPaaS (communications platform-as-a-service) company that is a direct competitor to Twilio ( TWLO). Even strong earnings releases in Q3 are being met with either ambivalence or a sell-off, indicating that many of these stocks are priced for perfection - and anything less than perfection is likely to burst the air in the valuation balloons that have built up since the start of the pandemic. Over the past few weeks, the market has sent a very clear and loud signal that appetite toward small/mid cap tech and growth stocks is waning. Blue Planet Studio/iStock via Getty Images
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