There are not a lot of stocks trading higher today, but a name
that's bucking the market weakness is AudioCodes (AUDC 10.34, +0.46, +4.66%). The company is an
Israel-based supplier of VoIP systems and products. Its networking products
consist of connectivity platforms (Gateways, SBC and MSBR), IP Phones and
management server suites. Basically, its products facilitate the transmission
of voice, data, and fax over packet networks. It also has Technology (chips and
boards) and Services segments.
AUDC helps companies build and operate all-IP voice networks for unified communications (UC), contact centers, and hosted business services. It offers a broad range of products that are sold primarily to OEMs, system integrators, and network equipment providers.
The modest upside in the stock this morning is due to AudioCodes announcing that it has received Israeli court approval to repurchase up to an additional $12 mln of its shares. The court approval also permits the company to declare a dividend. The most recent court approval for share repurchases expired on December 14, 2018 and the new approval is valid through July 1, 2019.
AUDC has expanded in the last few years from selling chips to boards, subsystems, media gateway systems, media servers, session border controllers, and messaging platforms. AUDC has also invested significant resources to become a Microsoft recognized partner for their Skype for business platform.
The stock jumped in late October on a surprisingly strong Q3 report. Momentum seems to have picked up markedly in Q3. AUDC has seen as steady evolution in growth key markets, such as the movement to a digital workplace in the enterprise space and the transition to all-IP networks in the service provider world.
AUDC is also seeing an acceleration in its UC-SIP networking business. Just like in 1H18, its Q3 UC-SIP business grew above 30% yr/yr vs a beginning of the year forecast of +15-20%. AUDC now predicts this unit will be a $100+ mln business in 2019 a year earlier than thought.
It's not just that as almost all key business lines demonstrated very solid growth and strength in Q3. A key development in the quarter was marked step-up in operating margin. For years, AUDC has been below the 10% range, but that rose to 13.5% in Q3 vs 8.8% last year and 10.2% in Q2.
AUDC is up only slightly today on the news, but since it is not widely followed by sell side analysts we thought it was worth a bit of focus. The stock tends to be pretty volatile, so be cautious. While it's still early, there is hope that the Q3 results announced in October marked an important turning point for the company.
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