RADCOM Ltd. RDCM stock has declined 20.5% in the past three months, steeper than the 4.5% fall of the Computer-Networking industry. Over the same time frame, the Zacks Computer and Technology sector and the S&P 500 composite have registered declines of 14.3% and 9.3%, respectively. Escalating trade tensions and tariff troubles have been a drag on the overall market performance. 

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RDCM was up 2.6% in the last session and closed trading at $11.20, but is still 30% down from its 52-week high of $15.98. Does this pullback indicate a buying opportunity amid increasing macro uncertainty? Let us evaluate the pros and cons of RDCM and decide the best course of action for your portfolio.

RDCM’s Innovation in 5G and AI Bodes Well

RADCOM is a Tel Aviv, Israel-based company that specializes in providing cloud-native, automated service assurance offerings for telecommunication operators for 5G networks.

The company remains focused on innovation, AI and automation to capitalize on the global shift to standalone 5G and cloud-native telecom infrastructure. RADCOM is continually investing in research and development (R&D) to strengthen its leadership in 5G assurance, expand solution offerings and support operators in their transition to next-generation networks. The acquisition of Continual in 2023 has proven successful, contributing to revenues and opening new sales opportunities.

RADCOM ACE 5G assurance solution is now being productized as scalable, flexible packages designed to meet the needs of operators of all sizes. With this strategy, RDCM is looking to introduce new product offerings to a wide clientele with needs ranging from full-scale deployments to mid-tier implementation and even limited scope lab environments.

Driven by healthy momentum, RDCM has provided revenue guidance for 2025. It expects full-year 2025 revenue growth between 12% and 15%, with a midpoint of $69.2 million. This implies a 13.5% increase from 2024. For 2024, the company recorded revenues of $61 million, marking an 18.2% year-over-year increase and the fifth consecutive year of revenue growth and increased profitability.
RDCM presents a compelling investment opportunity with its attractive forward 12-month price-to-earnings ratio of 11.7, lower than the industry average of 17.93 a year ago.

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RDCM’s Strategic Partnerships Bode Well

Apart from targeting mid-tier operators by offering modular deployments, RDCM is also pursuing a broader go-to-market strategy by showcasing its offerings at major global events and integrating with large-scale platforms.

The collaboration with ServiceNow integrates RADCOM ACE to automate ticketing and complaint resolution systems, amplifying its impact on operational efficiency and customer satisfaction.

RADCOM recently unveiled the development of a cutting-edge, high-capacity user plane data capture and analytics solution driven by the NVIDIA Coproration's NVDA BlueField-3 Data Processing Unit (“DPU”). This innovative solution is designed to transform network observability, providing real-time, customer-level Quality-of-Experience insights while optimizing network computing resources.

The state-of-the-art solution utilizes the advanced computing capabilities, high-speed networking and flexible programmability of NVIDIA BlueField-3 DPUs to drive innovative advancements in intelligent assurance and AI-powered network analytics. This ensures that insights are available wherever the data resides, whether at the edge or the core.

By harnessing AI-embedded analytics and automation, RADCOM aims to help telecom operators gain deeper subscriber and service visibility, enhance performance and reduce operational costs. The company intends to test the solution with key customers in their labs in 2025 and aims for a full commercial launch in early 2026.

Challenges Loom Ahead for RDCM

Increasing operating expenses could squeeze margins. In the last reported quarter, non-GAAP operating expenses for the period were $9.4 million, up from $8 million in the prior-year period. In the current year, it is stepping up R&D investments to develop additional automation and GenAI capabilities to support productization plans. The company also expects higher sales and marketing costs to support an increasing opportunity pipeline and expand coverage in the local region. Increasing costs without revenue acceleration could compress margins and profitability in the short term.

Moreover, RDCM faces high customer concentration risk as it is reliant on large contracts like Rakuten and Norlys. Also, productization of RADCOM ACE is still in development and any execution mishaps could weigh heavily on the top-line performance.

In the past 60 days, analysts have kept their earnings estimates unchanged.

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How Should Investors Play RDCM Stock?

RDCM is well-positioned to capitalize on the next phase of telecom transformation. However, higher costs, execution mishaps and geopolitical rivalry, and forex volatility could put downward pressure on the stock.

Therefore, we believe new investors should wait for a better entry point and existing investors should retain RDCM stock, which currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks worth consideration with the broader industry space are Cisco Systems, Inc. CSCO and NETGEAR Inc NTGR presently carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cisco’s fiscal 2025 earnings is pegged at $3.72 per share, unchanged in the past seven days. Cisco’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 4.07%.

The Zacks Consensus Estimate for NETGEAR’s 2025 bottom line is pegged at a loss of 75 cents unchanged in the past seven days. NETGEAR’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing once with the average surprise being 151.77%. 

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This article originally published on Zacks Investment Research (zacks.com).

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