American telecom mammoth Verizon recently became the third-highest shareholder of a budding 5G-infrastructure-building company. This has led to an increase in interest in the shares of the budding company, reflected by an 80% rise in share price.
Source: Z z
What Happened?
The shares of Casa Systems, Inc. (Nasdaq: CASA) soared by 80% when it announced that Verizon had invested $40 million in a multi-year purchase contract. With this purchase contract, Verizon now owns 9.99% of CASA shares.
Why It Matters
Up until now, Casa Systems had limited penetration into the North American Market. However, this deal should start to serve as a great place to grow for the company. Jerry Guo, the CEO of Casa Systems shares this belief when he said “this announcement is an important milestone for our 5G Core and Security Gateway technology, as well as the growth potential of our business”.
Verizon hopes to improve its Mobile Edge Compute (MEC) technology using Casa Systems’ 5G Core Network Functions.
Another part of the deal is a $20 million that Verizon agrees to pay CASA over time, as a development fee to help Casa grow its services. This is also a significant vote of confidence by Verizon in Casa Systems.
What Next
Thanks to that announcement, many investors have gone bullish on Casa stock. Even prior this partnership, CASA was a relatively solid stock in its own right.
In its Q4 reports for 2021, CASA recorded total revenue of $105 million, about a 14% drop year on year. This drop was attributed to supply chain problems. But the company finished 2021 strongly with total revenue of $401 million.
Technical Analysis
The 80% rise in the CASA Stock took the price out of a bearish trendline into bullish territory. But before this new trend is confirmed, the stock is going to have to break out of the $7.7 – $8.3 resistance level. Otherwise, the price could return to the $3.2 – $4 support level. Another level of potential significance is around $5.8.
