I am opening a thread for the Swedish company Waystream Holding AB, which has been mentioned a few times on this forum before. This is my first time starting a thread, so I ask for some leniency from my fellow forum members 
Waystream is a company listed on Nasdaq Stockholm First North in 2015 that develops and sells primarily fiber optic network switches and routers. The company’s market capitalization is approximately €35 million, and its enterprise value (EV) is roughly the same. The company is headquartered in Lund.
I originally discovered the company through various podcasts, but my interest was piqued again after reading Coeus Invest’s latest investor letter, which states that Coeus is one of the anchor investors with an approximately 5% stake. That letter contains a somewhat longer and very high-quality summary of the company, which is worth reading if you are interested. I will refrain from copying it here for copyright reasons 
What does Waystream do?
Waystream designs and manufactures software-based network switches for fiber optic networks. New orders are generated when fiber networks are built, but also for the maintenance of old networks. Switches are typically replaced every 5-10 years, which creates continuity for revenue.
Customers
The company’s customers are mainly network equipment suppliers and, above all, operators involved in building fiber optic networks. About half of the revenue comes from Sweden, a quarter from the rest of the Nordics, and the remaining quarter from the rest of Europe, which primarily means Germany. In 2022, Telia organized a tender for the supplier of its fiber network switches, which Waystream won. This “framework agreement” did not specify the size of future orders.
Business and Share Price Development
Revenue and EBIT (in SEK)
2019: 66 and 10
2020: 86 and 15
2021: 91 and 19
2022: 139 and 26
After the listing, the share price moved sideways or slowly downward for a long time until the strong organic growth that began in 2021 led to popularity among Swedish retail investors and a sharp rise in the stock, which was further boosted by the agreement announced with Telia. After the peak in December, the stock began to decline, and the weaker-than-expected profitability in the Q1 2023 report published a few weeks ago (EBIT €0.04 million) led to a -25% dive in the share price.
It is worth noting that Waystream does not fly under the radar; as I understand it, the company is discussed and written about regularly in various Swedish investment media, but due to its small size, it lacks interest from institutional investors.
The company’s own targets for 2023-2025:
- Revenue growth 10-15%/year
- EBIT margin 15-20%
Competition
The industry includes giants like Huawei, Alcatel-Lucent, and Cisco, with whom it may be difficult for Waystream to compete for large orders. Waystream is a small player whose advantages may include tailored niche products and flexible operations with smaller orders. Furthermore, amidst geopolitical tensions, Waystream may gain a foothold in Central Europe as a reliable Nordic player, for example, as Huawei withdraws. Winning the Telia tender increases credibility significantly.
Ownership and Insider Holdings
CEO Fredrik Lundberg: ~€700k
Chairman of the Board: ~€300k
Two other board members have larger stakes of ~€1.5M in shares
Other insiders have smaller holdings.
It is worth noting that the CEO has an extensive background at Telia.
Investment Case
- Vast fiber optic market where Waystream is a small and agile player capable of working closely with operators and producing tailored products
- The company’s small size makes percentage growth easier
- Organic profitable growth at a sensible valuation
- Geopolitical tensions and specifically the forced withdrawal of Chinese players like Huawei from European markets
- The framework agreement signed with Telia, which could generate cash flow and improve Waystream’s status
- Potential acquisition target?
Risks and Question Marks
- The grass-roots level of the business is relatively difficult for a layperson to understand and follow without working in the industry
- Technological risk
- Fiber optic networks vs. 5G. Is fiber even the future if the internet moves to wireless? Of course, fiber is also needed for erecting 5G masts, but Waystream, as I understand it, focuses entirely on household and business networks (FTTH and FTTB)
- The risks of a small company are always elevated because the stock is volatile and insider shenanigans are easier compared to large companies
Link to the company’s website: [Communication Everywhere | Waystream]
RedEye follows the company: [Waystream Group - Redeye]
Summary
As a rule, I am quite skeptical of these small tech firms that rocketed in 2021-2022, and as a beginner, it is very difficult to get a clear picture of competitive advantages or future prospects. Additionally, it should be noted that all kinds of micro-cap companies of varying quality end up on Stockholm’s First North. On the surface, however, Waystream appears to be a profitably growing mini-firm operating in an interesting industry. The valuation is reasonable after the latest dip, but there is high volatility in small numbers. I took a small tracking position after the latest dip, but for now, I will wait to see how the Telia deals progress.
What thoughts does the company evoke in fellow forum members? Has anyone followed the company more closely? The floor is yours 
