It’s been quite the ride for Parateum (TEUM) investors.
The company’s share price surged out of the gate early this year, reaching a gain of 225% by mid-March. Over the next two months, the stock fell a manageable 15% before collapsing about 58% between the end of May and last week. But all of a sudden, shares are up 30% since Wednesday. The spark? The company issued a response to criticism from short-seller Viceroy Research, which shouldn’t surprise investors as this isn’t the first time Parateum has come out swinging against critics.
Following meetings with CFO Ted O’Donnell and IR Mike Bloom last week, Maxim analyst Allen Kle says, “the company is demonstrating good momentum in new business wins.” Overall, Parateum connections were up 441% since last year to 12 million connections. During the meetings, the analyst was “encouraged to learn about three iPass customers that have beta tested a full MVNO solution for their employees of which two will be signing contracts,” which represents “significantly higher revenue per month,” and could be “worth several million in annualized revenue.”
As such, Klee reiterates a Buy rating on TEUM stock with a $9.00 price target, which implies nearly over 250% upside from current levels. (To watch Klee’s track record, click here)
Overall, Klee expects “growth drivers to come from the company’s compelling one-stop solution to provide multiple network connections and functionality along with managing mobile and Wi-Fi needs in a cheaper and faster way.” Parateum continues to add new customers to its roll, many of which are attracted to its one-stop-shop model. Because of this, the analyst expects “Pareteum to continue to generate attractive growth rates with tailwinds from growth in connectivity from the demand for mobile, mobile data plans, IoT, and smart cities.”
In response to criticism from the short-seller, Klee believes the report “had numerous inaccuracies.” His main conclusion is that the analysis is flawed in its conclusions and distorts key fundamental issues of the company, including understating likely future revenue in that it ignores any new customer wins that are not yet captured in the CRB. Further, while the report claims Parateum to be “in breach of US sanctions against Iran through services to Iranian MVNO,” Klee says “the company runs everything through the Office of Foreign Assets Control (OFAC) and did not have anything red-flagged.”
All in all, though Parateum is taking investors on a ride, its stock is still up about 50% for the year. The analyst community does not see this as a passing fad. TipRanks analysis of four analyst ratings shows a Strong Buy rating, with all four analysts recommending Buy. The $8.00 price target represents a 203% increase from current levels. (See TEUM’s price targets and analyst ratings on TipRanks)