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Why the Superloop (ASX:SLC) share price is surging higher today

Pointing to an upward trend in data on screen.
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The Superloop Ltd (ASX: SLC) share price has been a strong performer on Wednesday.

In afternoon trade the independent connectivity services provider’s shares are up over 4% to 98 cents.

Why is the Superloop share price climbing higher?

Investors have been buying Superloop’s shares following the release of an update at its annual general meeting this morning.

At the meeting the company provided investors with a reminder of how it performed in FY 2020 and its performance so far in the new financial year.

In FY 2020, Superloop delivered revenue of $107 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $13.5 million. The latter meant the company achieved the midpoint of its guidance range despite the challenges presented by COVID-19.

Management advised that this result was underpinned by significant growth in continuing businesses and prudent cost management.

What about FY 2021?

Superloop revealed that it has started FY 2021 in a positive fashion with strong growth in core fibre connectivity and home broadband during the first quarter.

In addition to this, the company spoke very positively about its enterprise opportunity, noting that IDC estimates that the SD WAN market is seeing remarkable growth. IDC expects a compound annual growth rate of nearly 70% and for the market to be worth US$8 billion by 2021.

Management commented: “With a multibillion dollar addressable opportunity, Superloop’s ambition is to become the leading challenger in this market, and we are extremely well positioned to execute this.”

Guidance.

Management expects core fibre sales growth to lead to strong underlying core EBITDA growth in FY 2021.

It also intends to make a ~$3 million investment in new growth initiatives to drive the accelerated monetisation of its existing assets.

As a result, it is forecasting FY 2021 EBITDA of between $18 million and $20 million. This represents a year on year increase of ~41%.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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