Down 47% in 2 months, is the Aussie Broadband share price an opportunity calling?

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.

A man with a colourful shirt clasps an old fashioned phone ear piece to his ear with a look of curious puzzlement on his face as though he is pondering the anser to a question.

The Aussie Broadband Ltd (ASX: ABB) share price has been losing signal with market sentiment in the last couple of months.

Since mid-April, the Aussie Broadband share price has declined by almost 50%. In other words, the telco’s share price has halved.

However, some experts are viewing this as an opportunity to buy shares of the fast-growing telecommunications company.

How fast is the company growing?

The latest that investors have heard from the company was its FY22 third-quarter update.

At 31 March 2022, Aussie Broadband said that it had 548,911 active total broadband services. This was an increase of 11% quarter on quarter and a 47% increase year on year.

That total broadband number included 446,814 residential active services. This was a 6% rise quarter on quarter and a 32% rise year on year.

But the business has more services than just broadband. Another area is a small but growing mobile segment. Aussie Broadband had around 35,000 mobile services as at 31 March 2022. That was a 9% increase year on year and a 62% rise year on year.

The company reported that its total number of all active services was 697,083, up 10% quarter on quarter and up 42% year on year. Growth can have an important influence on the Aussie Broadband share price.

Over The Wire acquisition

Aussie Broadband acquired the diversified telecommunications business Over The Wire earlier this year. The business is a tier one voice provider, and offers a “range of tailored cloud, connect and collaborate solutions to business, government and enterprise customers”.

The ASX share is targeting annual cost synergies of between $8 million to $12 million within three years, ongoing replacement capital expenditure savings, and significant strategic benefits.

It has already achieved early synergy wins such as moving a significant portion of voice traffic onto the Over The Wire tier one voice network. This has resulted in around $3 million of annualised earnings before interest, tax, depreciation and amortisation (EBITDA) synergies already being actioned.

For the three and a half months that Aussie Broadband will have owned Over The Wire in FY22, it’s expected to generate around $11 million of EBITDA. Including that figure, Aussie Broadband is expecting to make full-year EBITDA (before transaction costs) of between $38 million to $39 million.

Broker ratings on the Aussie Broadband share price

Ord Minnett currently rates the business as a buy, with a price target of $5.10. That implies a possible upside of more than 60%. The broker notes that the ASX telco share continues to capture market share.

Credit Suisse is another broker that rates the business as a buy, with a price target of $5, suggesting a possible upside of around 60%. It thinks the decline of the Aussie Broadband share price has been too hard.

The post Down 47% in 2 months, is the Aussie Broadband share price an opportunity calling? appeared first on The Motley Fool Australia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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