Radcom Receives Another Raise: $27 PT [Needham & Company]

Yesterday, Needham & Company research analyst Alex Henderson released an updated valuation report, and increased his price target for RADCOM (NASDAQ: RDCM) to $27 per share, up from $23 per share [the update comes just 4 weeks after his last upgrade].

He cites some things we had suspected:

[1] RADCOM is partnering with Gigamon (NASDAQ: GIMO) for network security solutions.

[2] GIMO is already working with Amazon Web Services and the AT&T/AWS partnership announcement could drag RADCOM into the cloud infrastructure-as-a-service market ("IaaS") and expand the TAM.

[3] Orange and Colt Technology Services are trialing ECOMP, AT&T's open-source platform meant to help CSPs onboard and manage VNFs faster and more effectively. We already thought these players could be potential RADCOM customers given the connection to ECOMP, and Colt recently announced a first "multi-operator" VNF service success with a North American Tier-1 who we suspected was AT&T. Part of the importance of the new NFV architecture is a robust ecosystem where CSPs have inter-operable services.

[4] 4 of the 9 RADCOM CSP trials appear to be progressing very rapidly - we think it is Orange, Colt, Verizon and Vodafone. Mr. Henderson updated his CY17 model and is looking for $39.6 million revenue. I suspect there is a path to $60 to $75 million next year if RADCOM closes a couple new Tier-1 CSPs and extends MaveriQ within the customer base.

Conclusion

Carl Icahn recently said in a CNBC interview that investors should "buy things that are obvious, but not yet apparent." RADCOM looks more obvious as new announcements hit the newswire each week. A raw growth story for 2017-2020 appears very, very likely in my opinion. It will become readily apparent to investors as RADCOM closes more deals, and investors start to price in a winner-take-all scenario.

I'll be following the Silicom (NASDAQ: SILC) and GIMO earnings announcements and conference calls this week to see if there is any more incremental NFV news that could prove salient for RADCOM.

Disclosure: I own RDCM shares.