We came across a bullish thesis on Synchronoss Technologies (SNCR) on Value Degen’s Substack by Unemployed Value Degen. In this article we will summarize the bulls’ thesis on SNCR. Synchronoss Technologies share was trading at $13.05 as of Sept 6.
A data center operator working on a rack of servers, emphasizing the company’s cloud services.
Synchronoss Technologies (SNCR) is the market leader in white-label mobile cloud services, operating behind major carriers like Verizon and AT&T to facilitate cloud storage solutions for their customers. Despite having contracts covering 400 million customers and 10 million active users, SNCR’s market penetration remains limited, and its future growth prospects in this segment are unclear. The company’s current contracts have 4-6 years left, but there is uncertainty about renewals, acquisitions of new contracts, or organic growth, making it challenging to predict the company’s trajectory.
What complicates SNCR’s investment case further are the company’s complex financials, which can mislead casual observers. Previously, SNCR operated three business segments: cloud computing, messaging, and networking. In 2021, it sold its messaging and networking divisions, leading to retroactive adjustments in its financial statements that make the company’s revenue trends appear more negative than they actually are. While revenue seemingly plummeted from $291 million in 2020 to $189 million in 2021, the true decline, adjusted for the sold segments, was from $291 million to $280 million—a more gradual downturn. The cloud segment has shown mixed results, with modest growth of 2.1% in 2021 but minor declines of 1.6% and 0.7% in 2022 and 2023, respectively. However, recent quarters have shown a return to growth, with revenues increasing by 2.3% to 3% per quarter.
This tentative turnaround has caught the market’s attention, with SNCR’s stock rising from $3.69 in October to $9.93 today. The company’s management attributes this improvement to its concentrated focus on the cloud segment and its high-margin business model, boasting gross margins of 75% and net margins of 30%. Management is optimistic, projecting a 5% – 8% revenue increase for 2024 and a low double-digit growth rate (11% – 12%) for 2025 and beyond. If achieved, these growth rates could potentially double SNCR’s Enterprise Value to $689 million by 2026, driven by an expected revenue of $172 million in 2025.
Despite these promising signals, SNCR remains a speculative bet. The company’s future largely hinges on its ability to maintain and expand its cloud customer base, a factor currently outside the author’s expertise to evaluate accurately. For investors with knowledge of mobile tech and contract dynamics, this turnaround story could present a unique opportunity, though the risk remains substantial given the uncertainties surrounding its growth prospects and competitive positioning.
Synchronoss Technologies (SNCR) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held SNCR at the end of the second quarter which was 3 in the previous quarter. While we acknowledge the potential of SNCR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as SNCR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.