If You Like Apple Stock, You Really Need to Check Out Jamf

Apple (NASDAQ:AAPL) stock is up nearly 60% in price this year and has now topped the $2 trillion market cap milepost. A potential hardware upgrade supercycle propelled by 5G wireless networks and the company’s steadily rising services business has been key.

Speaking to the latter point specifically, recurring revenue has become a top reason to stay invested in Apple for the long term. If this reasoning describes your investment thesis for Apple, Jamf Holding (NASDAQ:JAMF) deserves your attention as well.  

Image source: Getty Images.

A business model married to Apple

As far as mission statements go, Jamf’s is simple: Help organizations succeed with Apple. Where it lacks in originality, though, it makes up by being tied to the world’s most powerful hardware designer. The business model is focused as well. Jamf helps organizations manage their fleet of Apple devices and apps with a cloud-based platform for setup, identity management, and security.  

Jamf had its IPO over the summer of 2020 and its stock promptly doubled in price. But a few months and a couple of earnings reports later, shares are down more than 20% from where they made their public trading debut. A couple of factors are at play.

First, revenue growth has been rising, but at a slower pace than the 39% rate at which it expanded in 2019. Second, although it doesn’t affect current owners of the stock directly, some existing institutional shareholders of Jamf recently decided to whittle down their stake in the company by a few hundred million shares. This rise in shares being traded perhaps created some confusion that there was an issuance of new stock, which is a common event among high-growth tech companies trying to raise additional cash (and not what is occurring here). Either way, Jamf — which has a market cap of $3.5 billion as of this writing — has seen its stock fall under some additional pressure.

But this recent downturn in share price isn’t totally fair. After all, Jamf just posted another solid quarter of growth in Q3 2020. Revenue increased 29% year over year, including a 40% increase in recurring revenue based on customer access to its cloud-based management platform. Annual recurring revenue (or ARR, often used by cloud software companies to measure the annualized value of their sales) was up 37% at the end of September to $261.5 million. The company also generated $28.2 million in free cash flow (revenue less cash operating and capital expenses) in Q3, good for a lucrative 40% margin on total revenue.  

Riding Apple’s coattails higher

As with Apple’s service business, the bullish thesis behind Jamf is steadily rising commercial use of Apple devices. Jamf already boasts eight of the top 10 largest U.S. companies, the top 10 largest U.S. banks, and 24 out of the top 25 most valuable global companies as customers. But there are many smaller organizations Jamf is making contact with for help in managing their fleet of iPhones, iPads, and the like. Among them are school districts, hospitals, and government organizations.

To illustrate the large market that is still untapped, Jamf said the number of devices utilizing its cloud software grew to 18.6 million at the end of Q3 — up from 17.2 million just three months prior. If Apple needs to grow the number of devices in use to expand its services segment, the same is true for Jamf on the enterprise side of the equation. And clearly it is finding plenty of iPhones and iPads in need of some help.

In a world that now has some 1.5 billion or more Apple products in operation, I think Jamf has plenty of room for further growth. At 14 times trailing 12-month sales, this stock looks like an intriguing value to me.