Why the Aussie Broadband (ASX:ABB) share price rocketed 20% higher today

The Aussie Broadband Ltd (ASX:ABB) share price is rocketing higher on Friday after revealing explosive growth in the first half of FY 2021…

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The Aussie Broadband Ltd (ASX: ABB) share price is on course to finish the week in style

In afternoon trade the internet service provider’s shares are up a sizeable 12% to $2.77.

At one stage today, the Aussie Broadband share price was up as much as 20% to a record high of $2.97.

When the company’s shares hit that level, it meant they were up just under 200% from their October IPO price of $1.00.

Why is the Aussie Broadband share price rocketing higher?

Investors have been scrambling to buy the company’s shares on Friday following the release of a trading update.

According to the release, Aussie Broadband has delivered a significant increase in broadband connections over the last 12 months.

The release advises that at the end of December, Aussie Broadband had a total of 342,634 broadband connections. This is up 31% over the last six months and 88% since this time last year.

What does this mean for its earnings?

In light of this strong growth in broadband connections, Aussie Broadband expects to report half year earnings before interest, tax, depreciation and amortisation (EBITDA) of $8 million to $8.5 million excluding IPO costs.

Including IPO costs, EBITDA is expected to be in the range of $6.9 million to $7.4 million.

This means that the company is well and truly on track to smash its prospectus forecasts for FY 2021. According to its prospectus, Aussie Broadband is targeting EBITDA of $12.66 million for the 12 months ending 30 June 2021.

Furthermore, Aussie Broadband has already generated five times more EBITDA (excluding IPO cost) in the first six months of FY 2021 than it did in the whole of FY 2020. The company reported EBITDA of $1.58 million for the last financial year on a pro forma basis.

What’s next?

Aussie Broadband is finalising its accounts and intends to release its half year results on 17 February 2021.

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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 Aussie Broadband Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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