By Lisa Thompson
NASDAQ: FATN
READ THE FULL FATN RESEARCH REPORT
For its first fiscal quarter of 2027, FatPipe (NASDAQ: FATN) reported revenues up 28% to $5.0 million while net income rose to $1.2 million, up 65%, aided by a $371,000 tax reversal. The salesforce is bringing in bigger and more deals as it grows and matures. Management said it plans to add five to six more sales employees by the end of December and expects to reach about 36 people by the end of fiscal 2027, with a possible range of 36 to 38 by March. The company is also expanding its sales partnerships. It recently signed up TD Synnex (previously called Tech Data), the largest technology distributor in the world, and we expect more announcements soon.
In FYQ1 2027, the company recognized part of the $7 million contract announced in July for public schools, negotiated at the state level, with approximately another third to be recognized in the September quarter. The company is hitting on all cylinders and is capturing business from legacy vendors who have been gobbled up by large companies, which offer higher prices with less service. FatPipe wins versus their offerings by providing a more comprehensive product, lower costs, and excellent customer service. As an example, in April, the company created a targeted VeloCloud replacement program to find users of VeloCloud and convert them to FatPipe as their contracts run out. VeloCloud was bought by Arista Networks in July of 2025.
We are making adjustments of our quarterly revenue estimates and revising quarterly net income and EPS to reflect the tax reversals that are expected to be the same as in Q1 for the next three quarters. The company’s NOLs should then be used up and the tax rate next year should be the full 22%.
Given the increase in valuation of its peers, we are raising our current valuation from $6.40 to $8.00 per share, which is approximately 5 times EV/Sales versus a peer average of 10.0 times.
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