Should You Buy Bulletproof at This Price?
We live in an age of information. The Internet of Things (IoT) has surged onto the platform. All our devices are now sharing data and talking amongst each other. But all this new data has to go somewhere. And many cloud-based technology companies are profiting from this.
One of these companies is Bulletproof Group [ASX:BFP]. However Bulletproof has gotten a bit of flak from investors. Their shares dropped more than 16% to 33.5 cents per share today.
Source: Google Finance
What happened to the BFP share price?
This morning, Bulletproof released their financial guidance for FY16. And, as you might already have guessed, things we’re less than rosy. Revenue expectations were up 67% from last year’s figures, to $47 million. Earnings are also expected to be up. The Group gave a range of $4.6million to $4.7 million for earnings before interest, tax, depreciation and amortisation.
This all sounds great, doesn’t it? So why were investors selling out?
The problem was underlying profits. Bulletproof stated in their announcement that ‘weaker than usual seasonal behaviour and some customer-side project delays’ contributed to the weaker than expected profits.
Some areas of the business, such as professional services and consulting experience, saw flat revenue growth.
The business simply didn’t experience consistent growth throughout the whole period (FY16). Instead, growth was on track in the first half of FY16, beating expectations. However, the pace could not be maintained during the second half of FY16.
Where to now for Bulletproof Group?
The results are somewhat disappointing; however, this doesn’t mean Bulletproof is down and out. Many of the investments Bulletproof has made in FY16 will continue to create revenue into FY17. They are also in a growing market. The research company Markets and Markets expects the cloud storage market to total US$65.41 billion by 2020. In 2015 this market only totalled US$18.87 billion.
And as we move further into our age of information, demand for companies like Bulletproof will only increase. So does this mean Bulletproof is attractive at this price? It really depends on how you want to value Bulletproof’s future estimated earnings.
But right now you might be able to buy Bulletproof at a price we might not see again in 2016.
Junior Analyst, Money Morning