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E-commerce, video conferencing, gaming, and basically any stocks involved with staying at home have seen phenomenal returns this year with many stocks up over 100%. In light of that, it’s hard to know whether you are buying too late or if we are just at the beginning of a lasting trend.
Fortunately, there’s no better place to be forward-looking than tech because something new is always happening that leads to money-making decisions.
Take for example Chewy.com (NYSE: CHWY), an online retailer of pet food and other pet-related products whose stock is up almost 200% since the start of the pandemic. This here is a fundamental shift in e-commerce and consumer habits and not a one-time event.
With stores closed across the country, it’s understandable why this company has done so well, and I believe they will be able to sustain their newfound business as people discover the convenience.
Why would you want to carry around a 30-pound bag of dog food, when you could get it delivered right to your door. Pet owners also rarely change brands making ordering an easy solution for everyone involved. Long after a vaccine is found, this trend will continue.
This is why I’m looking at the global communications market, a space that has seen massive growth during the pandemic and one that is likely going to see permanent change. Just look at the growth of products from Microsoft Corp. (NASDAQ: MSFT) and Zoom Video Communications Inc. (NASDAQ: ZM). Microsoft Teams has more than 115 million daily active users, up from 75 million in April, and Zoom has seen tremendous growth as well, with sales jumping 355% last quarter.
One of the important takeaways here is that this is going to be a lasting effect. Many companies have seen that videoconferencing and online collaboration work. The cost benefits make it even more appealing.
So much so that major companies are making a permanent shift. Facebook, Twitter, Square, Shopify, and Dropbox are just a few of the companies allowing their employees to work from home even after offices reopen.
With all of these collaboration, video, and voice tools going online, I’m looking at one company behind the scenes that is helping to power tech both in and out of the office.
Connecting Behind the Scenes
I’m talking about Bandwidth Inc. (NASDAQ: BAND), a communication-as-a-service company that sells enterprise-grade voice services and software application programming interfaces (APIs) for voice and messaging, using their own IP voice network. This company is no slouch with last quarter revenues up 40% YoY, even faster than the previous quarter’s growth of 35%.
As I mentioned above, I want to be as forward-looking as possible and that is why I’m looking at Bandwidth. Their products are helping its customers go cloud-native and I believe this will be a permanent change. It’s cheaper, scalable, and can be built into collaboration platforms.
Post COVID-19 the office has changed forever, creating a need for better communications tools and Bandwidth is powering them with its voice and messaging services.
Voice services are Bandwidth’s bread and butter product and having a national IP network platform, which in turn delivers reliability and crystal-clear audio for calls is a big reason why companies like Alphabet Inc. (NASDAQ: GOOGL), Microsoft, and Zoom use their product.
Every time you make a call through one of their collaboration tools like Microsoft Teams of Zoom conference that audio is coming through Bandwidth’s network. Their network is also used to power VoIP phone services like RingCentral Inc. (NYSE: RNG) and 8×8 Inc. (NYSE: EGHT).
Outside of voice it also offers messaging services. Companies like Rover use this service to connect dog walkers to their users, Wish uses it to send daily deals and GoDaddy Inc. (NYSE: GDDY) uses it to send notifications on important website activity.
Its products are powering a digital-first economy and that’s why I believe they are involved in a lasting trend. This past quarter highlights how well Bandwidth is positioning itself with its customers with 40% revenue growth year over year and a dollar-based net retention rate of 131%.
This is a great number to see and shows that current customers are scaling usage and allowing the company to grow even if they were not gaining new customers. In Bandwidth’s case, they have added a lot of new customers and have 2,015, up 25% from last year.
Every time we see one of their customers scale, like Zoom getting into the hardware game with the “Zoom Phone,” that also means that Bandwidth is growing. The same can be said with the growth of Microsoft Teams helping to push Bandwidth to new levels.
Once again, this is going to be a lasting trend. Yes, people will go back to their office, but the pandemic has shown major corporations around the world that people can work from home effectively and efficiently. This in turn has led to new work from home policies that will help Bandwidth grow for years to come.