Challenger telco Aussie Broadband Ltd (ASX: ABB) was an instant hit with investors after debuting on the ASX in October 2020.
In fact, the share price tripled from the closing price on that first day up until a year ago.
But in the last 12 months, the stock has definitely lost darling status, as the share price almost halved.
So what's happening here? Is the decline terminal, or is it worth buying for another bull run?
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Ignore the public face, the backroom is where it's at
The QVG Capital analysts are one group that reckon better days are coming for Aussie Broadband shareholders.
But it's not for reasons you might think.
Aussie Broadband is best known publicly as an NBN retailer, but this is a very low-margin cut-throat activity.
That unit is "not an attractive business", according to a recent QVG memo to clients.
"The thing that attracts us to Aussie is that they have been investing in their own fibre backhaul and have been growing their business and government division," read the memo.
"Business and government customers typically have lower churn and higher average revenues while on-net fibre margins can be 3x those of reselling NBN."
The QVG analysts reckon when the market wakes up to this, Aussie Broadband shares could rocket upwards.
"As Aussie's revenue and earnings mix moves more towards the higher quality business and government division, we believe a re-rating of the company is likely."
So that's a yes from QVG.
The big catalyst coming for Aussie Broadband shares
Last month, Discovery Fund portfolio manager Mark Devcich told The Motley Fool in an interview that he would also buy Aussie Broadband.
"The fall in share price hasn't really been due to execution issues. It's more just been a devaluation."
Devcich likes that the economics of NBN are changing, with wholesale prices likely to come down for Aussie Broadband.
"You may have seen that the NBN wrote down the value of the network by $31 billion recently, and that was driven by changes to the prices they charge the retail service providers," he said.
"Once these changes come through in 1 July, [which] is the expected time frame, there should be substantial margin uplift."
Although most NBN resellers will benefit, a premium-end provider like Aussie will reap more than the budget brands.
"Because Aussie Broadband gives higher speed plans, and higher usage customers, they're actually going to benefit more than a regular telco," said Devcich.
"We don't feel like consensus is properly factoring in the benefits that could come from this change in NBN pricing into the '24 financial year."
It seems Discovery Fund is also saying yes for another bull run.
