Why Route Mobile share price is falling

Sectoral indices were moving in tandem. But the clear winner of the sectoral race was the IT sector. The best IT stocks rallied big time.

But since the beginning of 2022, the situation reversed and IT stocks started falling. New-age IT stocks have proved to be the biggest wealth destroyers on bourses.

One stock from the lot which was a victim is Route Mobile.

The company has seen a sharp fall in 2022. But why?

#1 Promoter selling

Promoter holding in a company indicates the promoter’s trust in the future of the company. When promoters buy shares in a company it is believed that something good or big is about to happen.

Similarly, when promoters sell, the market believes that the promoters do not trust the company to do well, at least in the near term.

The promoters of Route Mobile have been slowly divesting their stake in the company. From September 2021 to September 2022 promoters sold almost 7% stake in the company.

As of 30 September 2022, promoters hold a 58.6% stake in the company.

#2 The great IT debacle of 2022

Ask investors which sector was the most disastrous sector in 2022 and they will say the IT sector hands down.

IT sector proved to be a nightmare during the time of market correction. Even the best IT stocks were bleeding big time.

Beginning from the giants of the IT sector like TCS, Wipro, Infosys, etc. to the newbies of the sector like Paytm, Nykaa, PB Fintech, etc. all showed investors stars during the broad daylight.

The sector was plagued by a high attrition rate, along with concerns of a global recession.

All of this has cumulatively had an impact on Route Mobile's share price.

How Route Mobile shares have performed lately

So far, in 2022, Route Mobile has fallen by 25.5%.

The company touched its 52-week high of ₹1,935 on 12 January 2022 and its 52-week low of ₹1,052.6 on 23 June 2022.

Why the fall looks like a temporary blip

Route Mobile's share price took a hit but it seems like the impact of the hit will wear out soon.

Route Mobile operates in the communication platform as a service (CPaas) sector. The sector is expected to grow at a robust rate. Increasing mobile penetration has helped the sector grow rapidly in recent years.

Reportedly, the CPaas sales will get a boost as more and more companies use CPaas to enhance their services.

With the increasing need for digital security around online payments, CPaas operators have a lot to offer now.

Route Mobile is all set to make the most of these tailwinds. It will complete two new acquisitions by the end of this financial year.

The Europe-based acquisition target will help Route launch mobile identity services while the Indian acquisition target will allow it to offer voice solutions, using artificial intelligence (AI) and machine learning (ML) technologies.

Despite weak performance on the bourses, Route Mobile has shown strong operational performance. They have targeted a growth rate of 50% for the current financial year. If the pace of its quarterly results continues, the company may achieve a growth rate of 60%.

The absence of any strong contender in the industry helps the company enjoy a leading position in the market.

So, while the share price of Route Mobile may seem dull, the future of the company certainly looks bright.

About Route Mobile

Route Mobile (formerly Routesms Solutions Ltd) is an Indian cloud communications platform as a service (CPaaS) company. Started in 2004 and headquartered in Mumbai, the company has a presence in more than 15 locations across Asia-Pacific, the Middle East, Africa, Europe and North America.

In 2019, the company was named among the Fastest Growing Companies in Technology and Telecom sector and was 2nd top fastest-growing Indian company in the United Kingdom.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com