Zacks Initiates Coverage of IDT Corporation With Neutral Recommendation

Core Viewpoint - Zacks Investment Research has initiated coverage of IDT Corporation with a "Neutral" recommendation, reflecting a mixed outlook for the company despite its progress in communication and payment services [1] Group 1: Financial Performance - IDT's high-growth segments, including National Retail Solutions (NRS), net2phone, and BOSS Money, significantly contributed to a 310 basis point improvement in consolidated gross margin in Q3 of fiscal 2024 [2] - NRS reported a remarkable 65.9% year-over-year increase in merchant services revenues, driven by the higher adoption of NRS Pay, indicating strong future profitability [2] - The fintech segment, led by BOSS Money, achieved positive adjusted EBITDA for the first time in Q3 of fiscal 2024, highlighting effective cost management and revenue growth strategies [6] Group 2: Market Positioning and Growth Opportunities - IDT Corporation has established a strong market position in communication and payment services, leveraging technology across fintech, cloud communications, and traditional communications [5] - The company is expected to benefit from technological advancements in net2phone, including new pricing models and AI-powered functionalities, which are anticipated to drive further growth [6] - The increasing adoption of contactless and digital payment methods presents significant growth opportunities for IDT [6] Group 3: Stock Performance and Valuation - IDT Corporation's stock has outperformed its industry peers and the broader market over the past year, currently trading at low valuation multiples relative to industry standards [7] - This low valuation presents an attractive entry point for investors, especially considering IDT's strategic market positioning and potential for profitability improvements [7] Group 4: Risks and Challenges - IDT faces risks from economic downturns, integration challenges, declining traditional telecom revenues, and rising operating expenses [3] - Compliance with evolving fintech regulations and intense competition necessitates continuous innovation and investment, which could impact profitability [3]