Why the Aussie Broadband (ASX:ABB) share price is charging higher today

This growing broadband provider has continued its solid growth…

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The Aussie Broadband Ltd (ASX: ABB) share price is charging higher in morning trade.

At the time of writing, the broadband provider’s shares are up almost 4% to $2.96.

Why is the Aussie Broadband share price charging higher?

Investors have been bidding the Aussie Broadband share price higher today following the release of its fourth quarter update.

According to the release, the company’s revenue has continued to increase during the quarter. It grew 8% quarter on quarter to $100.1 million.

This was driven by a 7.4% or 27,790 quarter on quarter increase in overall broadband connections to 400,848. This includes a 12% or 3,825 increase in business broadband connections to 35,354.

Another positive supporting the Aussie Broadband share price today was a 3,770 or 20% quarter on quarter increase in mobile services to 22,454.

In light of its solid finish to the year, Aussie Broadband expects to achieve earnings before interest, tax, depreciation and amortisation (EBITDA) at the upper end of its guidance range of $17 million to $20 million. This figure excludes IPO costs.

Management commentary

Aussie Broadband’s Managing Director, Phillip Britt, was very pleased with the fourth quarter.

He said: “We’re extremely pleased with performance across all segments for the quarter. Residential connections are continuing to grow despite strong competition in a high churn market, displaying the appeal for our high-quality network with award-winning customer service.”

“The increasing focus on our business segment is showing good returns and growing at a high rate. We believe there is huge potential, particularly for businesses looking for the same excellent customer experience that we offer our residential customers, and the ability to have more control over their network using the Carbon portal.”

“The fourth quarter also saw significant work to launch our first white label customer in early FY22, and we also launched mobile services under our new agreement with Optus. All these segments provide avenues for further growth for the company,” he concluded.

Outlook

Also giving the Aussie Broadband share price a boost was news that it has started FY 2022 very strongly.

The company advised that it achieved a record broadband sales month in July. This was driven by updated marketing campaigns, new promotional offers, and a small number of white label sales late in the month.

However, Aussie Broadband saw its CVC overage increase during July due to lockdowns in New South Wales, Victoria and South Australia. And with New South Wales expected to remain in lockdown throughout August, the company anticipates further increased CVC overage in this market.

It notes that customer utilisation in some areas peaked 24.5% higher in July than the month prior when they were not in lockdown. This means that more CVC is required to meet increasing demand and ensure services don’t become too congested, which comes at a cost to service providers like Aussie Broadband.

Positively, though, the NBN has announced a CVC rebate to partly offset increased overage charges incurred during the July lockdowns. As a result of the rebate, management expects July’s CVC overage expense to be over budget, but not materially.

The Aussie Broadband share price is now up 46% in 2021.

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Motley Fool contributor 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 and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. 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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