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IDT Corporation Is Poised For Growth And Capital Returns 

IDT Corporation (NYSE: IDT)  is emerging as a hot microcap fintech play and it’s one we want to put on our watchlist. The company engages in a variety of communications markets including traditional phone/mobile, payments, and money transfers. The company, based in New Jersey, is also a hotbed of potential spin-offs and there is already one in the works. The company says it will work on completing the spin-off of its net2phone business now that it has completed the acquisition of Integra CCS. Integra CCS is a CCaaS or contact center as a service company intended to flesh out net2phone’s UCaaS offerings and spur additional growth. 

“We are now focused on completing the previously announced spin-off of net2phone to our stockholders and are working to complete it by the end of the current fiscal year on July 31st,” says CEO Shmuel Jonas. 

IDT Corporation has not garnered the attention of any sell-side analysts but it is getting scooped up by the institutions. The institutional activity picked up noticeably in Q4 and is on track to outpace it in Q1 of 2022. So far, institutional buying in Q4 of 2021 and the first 8 weeks of 2022 has netted the institutions 4.1% of the market cap bringing their holdings up to 38.75%. This is still a low amount but a bullish tailwind for the stock nonetheless. In our view, institutional activity should remain high and help drive share prices back up toward the recent highs. Insiders, by the way, are also deeply invested in the company and hold 17% of the stock. 

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IDT Corporation Has Mixed Quarter But The Bottom May Be In

IDT Corporation had a good quarter but there is a culprit in the form of FX playing havoc with the headline numbers. The company reported $337.05 million in net revenue for the Q2 period of fiscal 2022 which is good for a decline of -0.8% from last year. The decline is due primarily to weakness in the money transfer segment which was positively impacted by both COVID-related tailwinds and positive FX factors in the prior-year period. Revenue in that segment fell -6.2% versus last year but, when adjusted for those mitigating factors, would have risen 48% and to a new record. 

The net2phone segment increased by 32.3% to $10.6 million and is on track to continue growing at a high double-digit pace. Not only is the segment growing organically but the addition of Integra will enhance offerings for current clients as well as attract new business. We think the NRS or National Retail Solutions is another candidate for spin-off as it grew 103.6% versus last year and is showing signs of acceleration. This segment is supported by reopening tailwinds and is adding new clients too. The segment added 1400 new POS clients and another 1,200 pay accounts for growth of 9% and 17.6% respectively. The core communications segment saw its revenue fall by -3.0% but there are mitigating factors there as well. The adjusted revenue-less-direct-cost-of-revenue is up 6% led by mobile top-up. 

The Technical Outlook: IDT Corporation Is Ready To Bottom 

Shares of IDT Corporation have been in a correction the last couple of quarters but may be nearing a bottom. The sell-off is driven at least in part by short-sellers that have the short interest up to the relatively high level of 6.15%. We’re not expecting a short-squeeze or any kind of major movement because of it but short-covering could help sustain a rally once it begins, especially if the institutions are buying on the dips. Looking at the chart, the stock hit a support level a few days prior to the release and is on track to retest it now. If this level confirms as support it may lead to a more substantial bottom in which case we’d become more willing to commit to the name. 

Companies in This Article:

Company	Current Price	Price Change	Dividend Yield	P/E Ratio	Consensus Rating	Consensus Price Target
IDT (IDT)	$47.94	-1.7%	0.50%	14.89	Hold	N/A