As the company’s name implies, American Virtual Cloud Technologies (NASDAQ:AVCT) is immersed in the rapidly growing cloud-communications sector. Therefore, enterprising traders can get cheap exposure to the cloud ‘s growth through a long position in AVCT stock.
Some folks might object that the stock price is too low, however. They might even label it as a penny stock, which can informally be defined as the stock of a small company that trades for less than $5 per share.
Also, traders might dismiss AVCT stock as a meme stock. It’s not necessarily bad for a stock to have short-squeeze potential, though. In any case, hopefully today I’ll be able to persuade prospective investors to take American Virtual Cloud Technologies more seriously.
If the firm’s share price can get back above $5, American Virtual Cloud Technologies may be viewed as more legitimate. Moreover, the company’s cloud-communications business unit makes it an underappreciated gem in the tech sector.
A Closer Look at AVCT Stock
As I alluded to earlier, $5 is a critical price level for stocks because that’s an informal dividing line. When a stock goes below $5, some people will pigeonhole it as a penny stock.
AVCT stock was flying high (relatively speaking) at $9 a year ago. In February 2021, however, the stock started a long period of decline.
Unfortunately, American Virtual’s share price fell below $5 in July and then just continued to decline after that. Yesterday the stock closed at $2.22.
Not long ago, InvestorPlace contributor William White reported that AVCT stock was garnering attention on r/ShortSqueeze, a Reddit sub-forum.
Specifically, the Redditors were discussing the possibility of American Virtual Cloud Technologies becoming an acquisition target. However, these are only rumors, and making investment decisions based on chatter by Redditors might not be a great idea.
Kandy and Alphabet Soup
American Virtual Cloud Technologies’ investor presentation tries to present the company as a diversified technology business.
Let’s be honest, though; American Virtual Cloud Technologies’ most important business unit, by far, is Kandy Solutions.
American Virtual Cloud Technologies acquired Kandy in December 2020. It describes the business as a “Globally deployed, white-label, carrier grade, cloud-based platform for Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS), and Communications Platform as a Service (CPaaS).”
That’s quite an alphabet soup, but apparently those acronyms can be quite lucrative. According to American Virtual Cloud Technologies, the total addressable market for cloud communications is on track to expand from $58 billion in 2021 to $100 billion in 2025.
Huge Growth Expected
Within that ballooning market, Kandy Solutions is poised to become a major revenue generator for American Virtual Cloud Technologies. In fact, the company projected that Kandy ‘s revenues would grow from $14.3 million in 2020 to around $18.8 million in 2021 and over $37 million in 2022.
A notable collaboration will undoubtedly help to drive that growth, as Kandy and mobile customer engagement platform Braidio announced an expanded partnership.
Together, Kandy and Braidio say that they will “power next-generation user experiences for an 80,000-user telehealth application and for a pet wellness application by a premier veterinary hospital system in the US servicing 25,000+ customers.”
It’s a potent partnership, as Kandy and Braidio are now combining forces to provide cloud-based, real-time communications solutions to their partners in the telecommunications sector as well as 300 million users globally.
The Bottom Line
Kandy should continue to be a powerful revenue generator for American Virtual Cloud Technologies. The unit’s sales should be boosted by its expanded partnership with Braidio.
Yet AVCT stock remains underpriced and underappreciated on Wall Street. Perhaps this is because the name is sometimes labeled as a penny stock. I would encourage prospective investors to look beyond the rumors and the labels and make their own informed decisions.
At a time when the cloud market is lucrative and rapidly expanding, Kandy will continue to greatly enhance American Virtual Cloud Technologies’ value for the foreseeable future.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
