Towerstream Corporation (NASDAQ: TWER)
Towerstream has been a very interesting stock to watch as of late. After big gains following updated guidance, the stock took a plunge on a new offering, only to recover again. Now, we’re seeing more declines. This is leading to a big question: “Where is TWER headed next?” Today, we’ll talk about the positive guidance, the new offering, today’s declines, and what we can expect to see from the stock moving forward.
TWER Produces Solid Q2 Guidance
As mentioned above, Towerstream recently saw big gains in value following the release of a guidance update. On June 14th, the company provided an update with regard to Q2 expectations. Here are the details from the release:
- Highly Profitable Contracts – The company said that 52% of all 145 On-Net contracts in April and May were secondary customer contracts. This just so happen to be the company’s most profitable offering.
- Revenue Is Up – TWER also said that the average revenue realized per On-Net contract is up 35% from April to May.
- Cycle – The sales cycle to installation on active On-Net buildings has shortened significantly. The time has dropped from months to weeks.
- New Property – Finally, TWER said that it reached an agreement with a large commercial property owner in New York City. The agreement surrounds providing On-Net high speed internet services to the property tenants.
As you can see, the update was overwhelmingly positive. It was followed by Towerstream Founder and CEO Philip Urso. Here’s what he had to say:
“On-Net is a win for the company and the customer… for Towerstream, it is capital efficient, focuses our sales staff and dramatically lowers customer churn. The customer gets fiber-quality in terms of speed and reliability, priced at about 40% below market rates.”
As a result of this update, we saw dramatic gains in the value of TWER.
Recent Declines Caused By A Secondary Offering
While TWER recently excited investors with guidance, the company also caused concern with a new offering. On Monday, the company announced that it entered into a fund raising agreement. In order to raise funds, Towerstream offered a registered direct offering.
Under the terms of the agreement, 15,000,000 shares of common stock were sold. Each share was sold at a price of $0.152 per share, for a total value of $2.28 million. On top of that, each share came with 5-year warrants, exercisable at $0.25 per share.
As a result, the stock saw incredible downward movement Monday. Nonetheless, we saw a quick recovery that brought the value back up yesterday.
Should We Be Concerned About Today’s Declines?
Today, more questions are being raised than answered as the stock declines. Currently (10:41), TWER is trading 1.36% down. So, should you be worried about the declines?
In my opinion, the answer is no. In fact, buying the dip may be a great move. The reality is that things are looking up in a big way for the company. You see, Towerstream is focused on installing its systems in high rise towers and other commercial buildings. While the cost of installing their systems may be high, the company makes plenty of profit on the back end when services are sold.
At the moment, TWER is focused on expanding its reach by installing its services in more towers. The new offering was designed for the company to raise funds to do just that! So, it was actually a great thing that the company was able to raise so much money.
At the end of the day, TWER is seeing better customer adoption rates, larger margins, and is doing great overall. As the company continues to go down its current path, we’re likely to see big gains in the value of the stock.
What Do You Think?
Where do you think TWER is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
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