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Shares in Gamma Communications (LSE:GAMA) are at a 52-week low at the moment. But I reckon the FTSE 250 cloud communications stock could be destined for bigger things.
Based on where the stock is trading right now and where I think the business is heading, I think the share price could double by 2030. And I’m putting my money where my mouth is.
Background
Gamma is a specialist in business-to-business cloud communications. A big part of this involves helping companies move their copper landline-based phone systems to the cloud.
Covid-19 accelerated the firm’s revenue growth, but a shift away from remote working has caused things to slow down since then. And the most recent update is a good illustration of this.
Aside from a big acquisition in Germany, Gamma’s sales grew 1% in the first half of 2025. And earnings per share were up 3%, which is unimpressive by almost any standard.
As a result, the stock is down 39% in the last five years. But I think there might be an opportunity going forward in the FTSE 250 name.
The current situation
Right now, Gamma shares trade at a price-to-earnings (P/E) ratio around 14. That’s historically low – over the last five years, the stock has typically traded at a multiple around 23.
Source: Trading View
A low multiple makes sense while the company is posting anaemic growth numbers. But I think there’s a good reason to expect this to change in the near future.
From February 2027, BT is retiring the UK’s copper phone line network. That means businesses will have to move their voice communications to the cloud – and Gamma stands to benefit.
If earnings per share can grow at 8% a year between now and 2030, a P/E multiple of 20 would see the share price double. And I think that’s highly realistic with the big switch on the way.
Risks
My investment thesis is built on businesses transitioning away from copper-based infrastructure towards fibre over the next few years. But the big risk is that this might already be happening.
BT’s big switch has been well-documented, so companies have had plenty of time to prepare. And if the majority have already migrated, there might be less scope for growth than I’m anticipating.
Earlier this year, however, BT reported that 22% of UK small businesses still rely on traditional phone lines. Other surveys also suggest 1 in 10 are unaware of the upcoming change entirely.
I think that means there’s still scope for growth from the UK’s shift from copper to fibre. And with time running out for companies to make the transition, Gamma should benefit in the near future.
I’m a buyer
Gamma shares are trading at record low P/E multiple, but there’s no reason to expect this to change without earnings growth. Fortunately, I think this could well be on the way.
I think the UK’s shift to fibre should generate strong demand for the company’s products. And with some modest growth and a slight increase in multiple, I think the stock can more than double by 2030.
That’s why I’ve started buying the stock this week. I don’t have an exact timeline in mind for the share price to reach £20 and things could get worse before they get better, but I’m very optimistic.
