Why Bandwidth Stock Fell 20% in March

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What happened

Shares of Bandwidth (NASDAQ:BAND) fell 20% in March, according to data provided by S&P Global Market Intelligence. The Communications-Platform-as-a-Service (CPaaS) company benefited in 2020 because it provides crucial services to companies like Zoom Video Communications and Microsoft. But investors are anticipating the end of the pandemic and are no longer as bullish on stocks like Bandwidth. 

So what

To be clear, nothing happened with Bandwidth’s business to explain why the stock was down in March. The company did raise $250 million by offering convertible notes on March 12. But if anything, Bandwidth stock was up in the days following this announcement, suggesting investors were pleased by this move.

Image source: Getty Images.

Bandwidth enjoyed a stellar year in 2020, with full-year revenue growing 48% year over year to $343 million. Active CPaaS customers also increased by a whopping 65% from 2019. Growth will be slower in 2021. But even still, management is guiding for 21% annual revenue growth at the midpoint of its guidance.

Looking at the chart of Bandwidth and some top peers such as Twilio and Agora, it’s clear that investors were selling these cloud-based communication stocks in tandem. Therefore, this has little to do with Bandwidth and a lot to do with how investors are perceiving the opportunity in this space right now.

BAND data by YCharts

Now what

I don’t recommend buying stocks simply because they’re down. But when a company like Bandwidth is down because of general market volatility, it can be a good time to take a closer look. Specifically with Bandwidth, investors should keep an eye on its global expansion. Late in 2020, it closed on its acquisition of Voxbone, a company that will help it offer more services internationally. If it’s able to effectively integrate Voxbone’s operations into its own, it could prove to be a catalyst for Bandwidth’s growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.