Synchronoss Technologies SNCR shares have returned 111% in the year-to-date period, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software industry. The sector and the industry have returned 20.8% and 22.1% over the same time frame.

SNCR shares have also outperformed industry peer Aspen Technology AZPN, shares of which have returned 6% YTD.

This white-label cloud software and services provider is benefiting from strong cloud subscriber growth. In the second quarter of 2024, the number of cloud subscribers grew 6.1%, which drove 5.9% of total revenues. Quarterly recurring revenues were 90.5% of revenues.

Its 75% of revenues are under contract for at least four years, which boosts top-line visibility. Strong demand for SNCR’s personal cloud, which supports smartphones, tablets, desktop computers and laptops, is expected to expand clientele that includes the likes of Verizon VZ and AT&T T. These two customers accounted for more than 10% of SNCR’s revenues in the first half of 2024.

Does Synchronoss’ expanding clientele make the SNCR stock buy right now? Let’s dig deeper to find out.

SNCR Outperforms Sector YTD

Image Source: Zacks Investment Research

SNCR’s 2024 Guidance Encouraging

For 2024, Synchronoss expects revenues between $170 million and $175 million, indicating 5.8% year-over-year growth. Recurring revenues are now expected between 85% and 90% of revenues. 

It expects an adjusted gross margin between 73% and 77% (up from previous guidance of 70% and 75%) and an adjusted EBIT margin surpassing 25%. 

Adjusted EBITDA is now expected between $43 million and $46 million, up from the previous range of $42 million to $45 million.

Net free cash flow for 2024 is expected to be $10 million.

SNCR’s Earnings Estimate Revision Shows Upward Movement

The Zacks Consensus Estimate for 2024 earnings is pegged at $1.19 per share, up from 56 cents over the past 60 days, indicating an 184.4% year-over-year increase.

The consensus mark for third-quarter 2024 earnings is pegged at 25 per share, up from 8 cents over the past 60 days. 

For the fourth quarter of 2024, the Zacks Consensus Estimate for earnings is pegged at 27 cents per share, up from 9 cents over the same timeframe.

SNCR’s Long-term Prospects Are Bright

Synchronoss expects to achieve double-digit revenue growth over the next two to three years, with recurring revenues of at least 90% of total revenues.

Adjusted gross margin and adjusted EBITDA of at least 75% and 30%, respectively. SNCR expects continued free cash flow over the same timeframe.

SNCR’s rich partner base is a key catalyst. Synchronoss partnered with Verizon to provide the latter’s customers Unlimited Cloud Storage as part of its new myPlan and myHome Perks offerings.

The deployment of the personal cloud platform to power SoftBank's Angel data box service has expanded SNCR’s footprint in Japan. Synchronoss continues to invest in expanding its presence and customer relationships in the country.

A strong liquidity position with a cash balance of $23.65 million as of June 30, 2024, is noteworthy. SNCR generated a free cash flow of $7.6 million in the second quarter of 2024.

Synchronoss reduced its cost of capital in the second quarter of 2024 by repurchasing $60.8 million of outstanding preferred stock at a discounted price of $52.6 million and $19.7 million of Senior Notes at a discounted price of $16.5 million. It used new financing of $75 million for repurchase purposes. 

The lower cost of capital results in annual pre-tax cost savings of more than $2 million. For 2024, the reduction translates to roughly $1 million of cash savings.

SNCR Shares Trade at a Discount

Synchronoss stock is cheap, as the Value Score of A suggests.

In terms of the forward 12-month Price/Sales ratio, SNCR is trading at 0.79X, lower than the Zacks Computer & Technology sector’s 6.26X.

Price/Sales Ratio (F12M)

Image Source: Zacks Investment Research

We believe SNCR’s strong growth prospect does not justify this discounted valuation.

Here’s Why SNCR Shares Are a Strong Buy

Synchronoss’ expanding cloud subscriber base is a key catalyst.

SNCR shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

SNCR Trades Above 50-day and 200-day SMA

Image Source: Zacks Investment Research

The Growth Score of A makes the stock attractive for growth-oriented investors. 

Synchronoss currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AT&T Inc. (T) : Free Stock Analysis Report

Verizon Communications Inc. (VZ) : Free Stock Analysis Report

Synchronoss Technologies, Inc. (SNCR) : Free Stock Analysis Report

Aspen Technology, Inc. (AZPN) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research