Discusses the recent acquisition and provides an update on the company
On Friday morning, cloud based telco services and software small cap Crexendo (NASDAQ:CXDO) announced to investors that they had entered an agreement to acquire Allegiant Networks LLC.
News of the deal sent CXDO shares 8.7% higher over in trading on Friday and brought the stock’s total gain to 19% for the week, giving the latest rally a boost of momentum.
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CXDO traded lower sharply in early 2022 and then found support in the low $2 range and moved sideways for the past 6 months. It has provided traders with an opportunity to execute multiple trades with 20-30% in gains when buying as the stock dips towards $2 before being bought back up.
Allegiant is a regional telecom and data services provider that services small to medium-enterprise business customers in Kansas and Missouri and will help Crexendo expand its footprint in these regions.
Allegiant, like Crexendo, offers Unified Communications as a Service (UCaaS) and also provides Telecom Services, Managed Services, and Network Services.
The transaction consideration will be paid with a mix of cash and securities. This includes a $2 million dollar cash payment, 2.46 million payment of CXDO shares worth ~$6.77 million at Friday’s closing price and $1.1 million in Notes payable to owner Bryan Dancer.
This gives an approximate transaction value of ~$10 million.
The transaction will see Allegiant’s CEO Bryan Dancer join Crexendo in an executive vice president role.
Crexendo management believes the transaction is consistent with the firm's M&A strategy of buying companies within the group's ecosystem that use the CXDO platform and that will help expand its reach and offerings.
Crexendo’s CEO Steven Mihaylo commented on the transaction highlighting how the deal is “accelerating our growth strategy and expanding our national presence, particularly in the Midwest”
Mihaylo also mentioned that the deal is expected to be “highly accretive” to the firm's financial earnings.
There was no mention of potential synergies from the transaction although the CEO did discuss how the transaction was part of industry consolidation and carries low risk with ease of execution.
Analyst Eric Martinuzzi from Lake Street Capital markets thinks the transaction will be accretive to Crexendo on sales and EBITDA basis. Martinuzzi estimates that Allegiant is generating around $8 million in annual sales and is currently profitable. Lake Street has a “buy” recommendation and $3.50 target on the stock.
Prior to the acquisition being announced, Northland Capital Markets analyst Michael Laitmore initiated coverage on the stock with an ‘outperform’ recommendation and a $4 price target.
Laitmore likes CXDO’s platform and says that the disruptive pricing has aided growth. He believes that the UCaaS market is still under-penetrated and that the company can more than double its growth from current levels.
On average CXDO has a consensus “buy” recommendation with all four sell-side institutions bullish on the company. The average target price is $3.88 across the street.
Crexendo is next scheduled to update investors when releasing third quarter results around the 8th of November.
The company will also present at the LD Micro Main Event Conference on the 25th of October.
The management presentation at the LD conference may provide upbeat outlook commentary on the year ahead which could further support this share price rally.
Fintels insider trading analysis of Crexendo gives a bullish officer accumulation score of 92.19 to the stock. This ranks CXDO in 60th ranks or in the top 1% of 11,595 screened companies with the highest levels of officer buying activity.
CXDO is featured so high in this list, because the group’s CEO and Chairman Steven Mihaylo has been consistently buying shares in the company on market. Most recently, Mihaylo purchased a parcel of shares at $2.98 per share in mid July.
Mihaylo owns a total of 11.24 millions shares in the company.
The chart below provided from the Fintel financial metrics and ratio page for CXDO illustrates the group's growth in sales over the last 5 years.
Article by Ben Ward, Fintel
