Checking Out OOMA

OOMA reports Q3 earnings on Tuesday, December 1, after market close with conference call at 5:00 pm ET. We have no position going into earnings but intrigued by recent technical strength and solid underlying revenue growth. Should be interesting to see what comes out of Q3 report as well as guidance.

The $129 million small cap is a provider of communications solutions and other connected services to small business, home and mobile users. The Company’s hybrid software as a service (SaaS) platform, consisting of its cloud, on-premise appliances, mobile applications and end-point devices, provides the connectivity and functionality that powers its solutions.

Consensus is looking for Q3 revenues of $23.3M (+27.7% y/y) and next quarter guidance of $23.0-23.5M (+25.8-28.5% y/y). Looking for subscription revenue of $19.5M (+36.0% y/y) based on our expectations of continued strong core user growth (+23.7% yr/yr to 747K) and a blended monthly ARPU of $8.30 (+6.7% sequentially, primarily driven by an increased mix of SMB/office users). Looking for churn rate to remain low at ~7% and management to discuss value-added connected services in large markets of home automation, monitoring and security.

Expecting company to finish FY2015 with revenues of $72.2M, rising to $89.8M in FY2016 (+24.3% y/y), rising to $110.8M in FY2017 (+23.3% y/y). That makes stock cheap at just 0.7x EV/Sales multiple, which is significant discount to communication peer average of 2.6x.

Let’s see if this under the radar small cap is able to get good traction to upside from here.