By Lisa Thompson
NASDAQ:FATN
READ THE FULL FATN RESEARCH REPORT
FatPipe (NASDAQ:FATN) offers patented advanced data communication software that securely connects offices and clouds into one cohesive network. It aggregates multiple data lines from multiple data carriers, using any last-mile connection, including 5G and satellite, into a single, seamless corporate network accessible anywhere in the world. It offers this software as a SaaS and also sells the hardware needed to use the software. The company had its IPO in April 2025 and plans to use proceeds to continue to increase its direct sales force to spur sales growth.
- FatPipe is an SD-WAN (Software-Defined Wide Area Network) provider that sells a service to manage the networks of small and medium-sized enterprises. Its patented solution is a software platform, often sold with an appliance, with additional application modules for cybersecurity, SIEM (Security Information and Event Management), and email security. In contrast to its competitors, it provides customers with one vendor to call for all network problems, and it can provide a hybrid solution that combines on-premise assets and cloud services, resulting in significantly lower costs for the customer.
- For the next year and beyond, management is focused on revenue growth and has taken the IPO proceeds to add to the sales effort. Since last year, it has more than tripled its salesforce from eight to 24 people as of the end of December, and as these salespeople become more productive, revenues should accelerate. The company plans to add another 12 salespeople in large cities where it does not have a presence. Management is also adding other channel partners, both traditional Value-Added Resellers (VARs) and Internet Service Providers (ISPs).
- The company launched its new all-in-one platform, “Total Security 360,” on October 6th and is now selling it as an upgrade to its current customers. It is an advanced single-stack security solution that can be deployed in both the cloud and on-premises. This upgrade can cost as much as three times as much as its base SD-WAN platform and provides the potential for significant revenue increases from current customers as well as new customers. Total Security 360 only became available after the September quarter ended.
- FatPipe’s software is written in-house, and all of its parts are fully integrated, in contrast to its major competitors, Fortinet and Cisco, which have bought companies and offer somewhat unintegrated solutions. FatPipe wrote and owns foundational patents for SD-WANs and can offer a platform differentiated from the competition. As primarily hardware providers, Fortinet, Cisco, and other competitors expect customers to primarily manage their own networks and target large companies with large IT staffs. FatPipe offers first-party management for its customer solutions.
- The company has been booking revenues upfront like traditional software companies, leading to lumpy quarters when big purchase orders come in. After the fiscal year ends, it may choose to move to more SaaS-like revenue recognition, booking revenues ratably throughout the contract, which would lead to more predictable and smoother revenues. The reason revenues were down year over year for FYQ2 is that the year before, an exceptionally large order was booked by their largest reseller.
- The company IPOed on April 7, 2025, at $5.75. and hit an all-time high of $23.27 that day. Since then, the stock has fallen significantly as long-time shareholders sold off stock and the company reported down revenues in its first six months as a public company due to a comparison with the exceptionally strong first half of the year before. The stock hit a low just before the company reported its December quarter results. After reporting a 30% revenue growth in the quarter, the stock has begun to recover.
- Its enterprise value is now only $24 million. It has an estimated 2026 calendar revenue of $20 million, making its EV/Sales ratio 1.2 times, versus comparable companies that average 7.0 times. We believe that as the company shows revenue growth and returns to its historical high margins, its multiple will expand. Using just half the peer multiple, that would make FatPipe stock worth $5.00 per share.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives payments totaling a maximum fee of up to $50,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.