- A couple of months' sell-off in Bandwidth (BAND -2.6%) is continuing today despite Morgan Stanley and analyst Meta Marshall seeing enough to take off the Sell sign.
- The firm upgraded Bandwidth to Equal Weight from Underweight, seeing "likely limited" further de-rating for a "quality growth asset with ample runway ahead."
- When Morgan Stanley downgraded, valuation had made it cautious since Bandwidth was trading in line with pure software comparables.
- "While growth has not been our primary concern given newer international opportunities from organic investments and Voxbone, we have ultimately been more conservative on valuation given margin potential and value proposition," Marshall says.
- But the stock is down by a third since its mid-October peak, vs. a decline of about 11% in the overall communications software group, creating a valuation gap of about 49% on an EV/sales basis, the firm says.
- It's lowering its price target to $140 from $145; that target now implies 13.4% upside.