NFON AG Faces Challenges but Maintains BUY Rating

NFON AG recently released its Q3 report, highlighting challenges in the European ICT market. Sales remained stable at €21.8 million year-on-year, showing resilience despite soft demand and extended sales cycles. The churn rate maintained at 0.5% per month, demonstrating a strong customer base. However, seat count fell by 2.6% year-on-year to 648,000, largely due to macroeconomic conditions rather than customer attrition.

Recurring revenue made up 94.1% of total sales, with ARPU rising to €9.92. Despite increased AI investments and cost pressures, which led to slightly weaker margins, gross margin improved due to price increases. The company revised its FY25 guidance with a conservative outlook but confirmed mid-term growth targets.

The strategic focus on AI and tighter pricing is seen as sound, though operational turnaround is slower than expected. The attractive valuation supports the retention of the BUY rating, with a new price target of €11.10.