Phunware is undervalued, Roth says

Ahead of the company’s first quarter results, Roth MKM analyst Darren Aftahi thinks there is money to be made on Phunware (Phunware Stock Quote, Chart, News, Analysts, Financials NASDAQ:PHUN).

On May 9, after market close, PHUN will report its Q1, 2024 results.

The analyst laid out what he is looking for from the quarter.

“We look for 1Q revenue of ~$1.3M, ~ 5% y/y declines for platform revenue as we still expect it to take a few quarters for PHUN to transition into its new go-to-market approach, land and expand its customer base in core verticals, and seek out new revenue opportunities (such as its crypto angle),” he wrote. “We model for gross margins of ~50% and total OpEx of ~$3.7M (NG), resulting in adj. EBITDA loss of ~$3.0M. 1Q does see some benefit from reduced headcount, but to grow, we would expect OpEx creep around sales and marketing going forward, although PHUN does intend to leverage its partner channels for sales into properties as well. Broadly, we focus more on trends in the customer pipeline, both net new adds but also expansion with existing properties, particularly in the hospitality space, where PHUN appears to have the most traction.”

In a research update to clients May 6, Aftahi maintained his “Buy” rating and price target of $20.00 on PHUN.

“PHUN remains in transition, but with many of the initial overhangs cleared up, we believe it is now in a much better position to begin to lean in on its PaaS offerings in hospitality, and later healthcare with both direct sales and indirect efforts with the help of partners,” the analyst added. “For now, it is brand awareness and PHUN finding ways to get its foot in the door so that it can begin to gain leverage to move upstream to larger properties and multilocation resorts. Like many media properties, we believe greater scale is key as PHUN can then begin to leverage its depth of consumer data into incremental monetization opportunities with its platform, both in existing apps, but also through its crypto angle with the Global Crypto Passport. For now, we take it one step at a time, with the expected focus on smaller hospitality sites, that can later be transitioned to sell into larger resorts and then adjacent verticals, but likely with a still prolonged sales cycle.”