On Tuesday, Benchmark has increased the stock price target for Ooma (NYSE:OOMA), a cloud communications service provider, to $17.00, up from the previous $15.00, while maintaining a Buy rating on the company's shares. The stock has shown remarkable momentum, gaining over 70% in the past six months and currently trading near its 52-week high of $15.52.
The revised stock price target comes ahead of Ooma's earnings release scheduled for this Wednesday after market close. According to InvestingPro data, two analysts have recently revised their earnings expectations upward for the upcoming period.
The new price target is based on valuation metrics more in line with the mid-cap S&P 400 index rather than the larger S&P 500, reflecting a conservative 1.7 times enterprise value to sales ratio. This valuation is grounded in a discounted cash flow (DCF) analysis, which takes into account the company's current financial situation and projected future performance.
Benchmark's optimism is fueled by Ooma's increasing traction with its AirDial offering and the successful integration of its recent acquisition, 2600Hz. The company has already demonstrated strong execution with revenue growth of 8.66% in the last twelve months.
The analyst anticipates Ooma to exhibit over 8% top-line growth in fiscal year 2026, even considering the contribution from the 2600Hz acquisition made this fiscal year. Adjusted EBITDA is expected to rise significantly, with double-digit increases for the next two years.
The firm also projects improvements in non-GAAP operating income and EBITDA as a result of decreased research and development costs relative to sales. This is due to the expected benefits from cost reduction and integration efforts, as well as the company's expanding scale.
With a healthy gross profit margin of 61.05%, Ooma's financial performance is expected to reflect these efficiencies and the company's ongoing growth initiatives.
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