IDT Corporation (IDT): A Bear Case Theory

We came across a bearish thesis on IDT Corporation on Valueinvestorsclub.com by funkycold87. In this article, we will summarize the bulls’ thesis on IDT. IDT Corporation's share was trading at $47.60 as of October 9th. IDT’s trailing P/E was 16.58 according to Yahoo Finance.

IDT has transformed from a declining telecommunications provider into a diversified business spanning POS system, global remittances, and UCaaS, leveraging its telco expertise, immigrant-focused customer base, and retail distribution network. This transformation drove strong EBITDA growth and total shareholder returns, with shares now trading around 10x EBITDA and the company maintaining a net cash position. NRS, the POS segment, serves niche markets like bodegas and smoke shops, but growth is plateauing as market saturation approaches, quarterly net additions have fallen short, and SNAP funding reductions may further pressure revenue.

The fintech remittance business, BOSS Money, is under regulatory pressure from stricter ICE enforcement and the OBBBA excise tax, contributing to declining transaction volumes, particularly to Mexico, while net2phone, the UCaaS and CCaaS segment, faces slowing seat growth and pricing pressure in an increasingly commoditized market. Meanwhile, Traditional Communications, the legacy telecom segment, has stabilized through disciplined cost management and pricing, but structural declines in voice traffic limit further EBITDA growth and could lead to reversals. Despite a track record of disciplined capital allocation and cash generation, expectations for continued double-digit growth appear overly optimistic, leaving the company exposed to downside risk, multiple compression, and a potential return to a “melting ice cube” narrative.

While IDT has successfully scaled new businesses and improved financial performance, the market may be underestimating headwinds across all segments. NRS, BOSS Money, net2phone, and Traditional Communications each face structural, regulatory, or competitive challenges, making IDT a compelling short for investors concerned about valuation risks and over-optimistic growth projections, with catalysts including decelerating POS adoption, remittance volume pressure, regulatory changes, and potential reversals in legacy telecom profitability.

Previously we covered a bullish thesis on IDT Corporation (NYSE:IDT) by LittleBarnSparrow in January 2025, which highlighted its diversification into high-growth segments like NRS, BOSS Money, and net2phone, strong operational performance, and robust balance sheet. The company's stock price has appreciated by 1.55% since our coverage, as the thesis played out partially. Funkycold87 shares a contrarian view, emphasizing headwinds across POS, remittances, UCaaS, and legacy telecom.

IDT Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held IDT at the end of the second quarter which was 23 in the previous quarter. While we acknowledge the potential of IDT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.