How to Profit from the Rapid Expansion of the Internet of Things (IoT)
According to Forbes, the Internet of Things (IoT) is creating a world where “anything that can be connected, will be connected.”
This new age of the connected customer is once again creating upheaval across not only the telecom landscape but in every industry and sector.
Mobile Network Operators (MNOs) have built their networks to cater to traditional personal devices such as tablets, smartphones, and laptops. Enterprises are exploring the obvious value that can be created by exploiting IoT and communications technologies. With the growing proliferation of the IoT, network operators and enterprises now must prepare for the onslaught of connected devices - ranging from industrial automation systems to automobiles.
Researchers at IHS predict the installed base of IoT devices will double from 15.4 billion in 2015 to more than 30 billion in 2020. By 2025 they expect the number of connected devices could surpass 75 billion.
As the number of connected devices soars higher, the network systems that are needed to connect and manage these devices will only become larger and ever more complex.
Our analysts at RedChip have discovered a company with a solution that ultimately will help to create value for a wide range of enterprises, and also drive down complexity and increase revenues for network operators struggling to deal with the oncoming explosion of connected devices.
The company is Pareteum (NYSE MKT: TEUM).
TEUM provides patented cloud based mobile communications infrastructure, operating software-as-a-service solutions, and managed services, that enable 21st century enterprises (including telecom carriers and virtual network operators) to offer a full suite of communications products, delivery platforms, support services, all combined with superior industry expertise and high quality customer service – all without substantial upfront investment.
Bain & Co. forecasts revenue for IoT vendors such as TEUM could exceed $470 billion annually by 2020.
Built on a monthly recurring revenue business model that provides high margins (from 60% to 85%) and trading at just 1.5x sales, TEUM’s share price has yet to reflect the massive opportunity ahead. And when looking at its EV/Sales ratio, TEUM shares are trading at a 45% discount to its peer group.
Classic Turnaround Play
Under the leadership of Hal Turner, Executive Chairman, a veteran in the mobile communications business, and recently announced Vic Bozzo, CEO, TEUM is executing a turnaround with new management and sales team.
Since taking the helm in 2015, Turner has increased revenue per employee from approximately $56,000 to $190,000.
Top-line growth forecasts are also robust. TEUM is expected to generate $12 million in revenue in FY16 and has given guidance that it expects 25% top-line revenue growth in 2017 off its $3 million Q4 2016 run rate. As the Company gains traction in the quarters ahead, we expect this growth to accelerate.
Leading Telecoms Already Rely on TEUM
Pareteum’s large Mobile Network Operator (MNO) customers include Vodafone (NASDAQ: VOD), the world’s second largest mobile operator by customer count, Zain (KW: ZAIN), the 4th largest mobile operator in the world in terms of geographical presence and other Tier 1 operators, MVNO customers such as Lebara and Lowi, and partners including Cleartech and Expeto.).
Globally, there are an estimated 200 Tier 1 operators, 360 Tier 2 and CLEC operators, and more than 500 next-generation providers. Collectively this represents a potential $350 million in annual recurring revenue for TEUM.
With the proven ability to effectively service providers such as Vodafone, which recently expanded its relationship with TEUM, the Company is well-positioned to grow market share in the months and quarters ahead.
Complementing its comprehensive solution offering, which intersects with numerous applications and industries, TEUM also offers a robust set of APIs that enable enterprise and mobile network customers to easily integrate new and legacy infrastructures across multiple channels.
Much like the Salesforce AppExchange, this app ecosystem will likely create a compelling long-term competitive advantage for TEUM.
While Salesforce rakes in hundreds of millions of dollars in revenue annually from its AppExchange, the real value is the barrier to entry it creates for new entrants. With over 400 new apps being added every year by partners, it’s nearly impossible for any competitor to take on Salesforce in a meaningful way.
TEUM could see similar market dynamics from its budding application exchange.
We believe TEUM could ramp revenue to more than $60 million by 2019, while maintaining gross margins north of 70% and increasing EBITDA margins to 35%.
And that revenue per employee number we mentioned earlier? We anticipate it could soar from the current $190,000 to more than $400,000 by 2019.
Now is the time to take advantage of this opportunity. TEUM has proven it can execute and it’s only a matter of time before major players on Wall Street step in, sending shares exponentially higher.
To learn more about this exciting company, visit the TEUM stock page
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements with respect to Pareteum's plans and objectives, projections, expectations and intentions. These forward-looking statements are based on current expectations, estimates and projections about Pareteum's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of Pareteum may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, Pareteum also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from those projected or suggested in Pareteum's filings with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained upon request from Pareteum Corporation.