Freedom Broker sees 65% upside in fintech small cap IDT

Freedom Broker has opened a “buy” recommendation on IDT Corporation with a target price that offers 65% upside versus current quotes. It likes IDT for its diversified business, where one segment finances the growth of other, high-margin divisions.

Freedom Broker has initiated coverage of IDT with a “buy” recommendation with a target price of $77.20 per share, implying 65% upside versus the Friday, March 14, closing price of $46.72 per share. In premarket trading today, March 17, IDT has gained 0.3% to $46.90 per share.

Freedom Broker likes IDT for its diversified business. Its cash-generating traditional communications segment funds growth of three other, high-margin segments: National Retail Solutions (NRS), which sells POS systems for retailers; BOSS Money, a money transfer service; and net2phone, a cloud communications provider. 

These divisions enjoy strong positions in niche markets and have significant potential for geographic expansion, Freedom Broker argues. It also highlights IDT’s lack of debt, which allows it to return capital to shareholders through stock buybacks and dividend payouts.

Freedom Broker also outlined risks for investors. These include growing competition in telecommunications and fintech, declining revenue in the traditional communications segment, and uncertainty around potential spin-offs of some divisions. For instance, a few years ago, IDT planned to spin off net2phone before postponing the move.

IDT has only one other analyst rating, according to MarketWatch.

Investor Thomas Niel argues in a Seeking Alpha blog that IDT currently trades at a discount to its underlying value. He believes this discount will persist until the company spins off fast-growing NRS and/or BOSS Money.

In early March, IDT Corporation reported financial results for its fiscal-2025 second quarter (ended January 31). Consolidated revenue grew only 2% year over year to $303.3 million. However, gross profit jumped 16% year over year to $112 million, and adjusted EBITDA soared 56% to $34 million. Earnings per share were up 40% to $0.80.

Three out of the four company’s segments saw top-line growth in the fiscal second quarter: NRS grew 31% year over year to $33 million; BOSS Money 34% to $33.5 million; and net2phone 6% to $21.5 million. The only segment with a year-over-year decline was traditional communications, where revenue fell 5% to $212 million.

IDT CEO Shmuel Jonas described the company’s financial position “strong.” Thanks to that, IDT ramped up share repurchases in the second quarter, spending $8.5 million on buybacks. The company also raised its quarterly dividend by 20% to $0.60 per share.