Canadian technology stock Tucows (TSX: TC) has gone through a rough patch, with its share price plummeting 80% from 2021 highs and falling another 8% year to date. But beneath this battered exterior lies a resilient and grossly undervalued software and services business with promising recovery potential and improving fundamentals that the market seems to be overlooking.
Tucows operates through three distinct segments: Tucows Domains (its legacy operating segment and largest revenue generator), Wavelo (a telecom software platform), and Ting (a fibre internet service provider). While this diversified structure makes valuation tricky, it also creates an intriguing investment opportunity for long-term-oriented investors.
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The legacy cash machine
Tucows Domains has been generating steady cash flow for an impressive 25 years and counting. During the fourth quarter of 2024 (Q4 2024), this segment grew revenue by 6%, expanded gross profit by 8%, and increased adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 8% year over year. With renewal rates holding steady at 76% — above industry average — this mature business provides a solid foundation for cash flow generation and debt servicing capacity that could de-risk Tucows stock in the long term.
Interestingly, this mature segment could slightly grow in 2025 following a new India deal that could add over two million domains under Tucows’s management this year.
Tucows stock’s growth catalysts are taking shape
What makes Tucows stock particularly interesting now is the transformation of its Ting Internet business. After years of heavy capital expenditure building fibre networks across underserved U.S. communities, Ting has reached a critical milestone — generating positive adjusted EBITDA in December 2024. The segment grew subscribers by 17% year over year while revenue increased by 14%.
Management has made tough but necessary decisions, including stopping new fibre construction and restructuring operations for capital efficiency. These moves have dramatically improved Ting’s financial profile, reducing its fourth-quarter adjusted EBITDA loss from $12.3 million in 2023 to just $1.5 million in 2024.
Meanwhile, Wavelo continues building momentum. This telecom software platform renewed its contract with EchoStar’s Boost Mobile and added three new customers in 2024. The segment generated $13.8 million in adjusted EBITDA for the year, exceeding prior management’s guidance of $10.6 million.
Accelerating financial turnaround
The consolidated financial picture shows a company gaining strength over the past three years. Total revenue for Q4 2024 increased 7.1% year over year to $93.1 million, while gross profit jumped 19% to $21.2 million. Most impressively, adjusted EBITDA soared 403% to $12.8 million.
The year 2025 could mark a significant turning point for Tucows stock and its long-term investors’ fortunes. Management projects consolidated adjusted EBITDA of approximately $56 million — a staggering 75% increase over 2024. A breakeven for the Ting segment is a welcome development in 2025 as the company enters a new sustainable operating profitability profile.
Adjusted EBITDA measures a business model’s capacity to generate sustainable operating earnings and cash flow, regardless of how it is funded. Tucows stock should fetch better valuation multiples as all its operating segments become financially sustainable in 2025.
The company is also focused on strengthening its balance sheet, having repaid $16.5 million in principal on its syndicated loan throughout 2024.
Is Tucows stock finally a buy in 2025?
Trading at a historical price-to-sales multiple of 0.5, Tucows stock presents an attractive risk-reward proposition for long-term investors. You’re effectively acquiring a profitable domain business at a discount while getting the growth potential of Ting Internet and Wavelo at little to no cost.
However, significant risks remain. The company continues to carry substantial debt, with a syndicated debt position of US$194 million and US$288 million in notes payable. The book value of Tucows’s equity dropped into negative territory last year, and the business may need dilutive recapitalization. While Ting’s debt is bankruptcy-remote from the rest of the company, high interest rates continue to strain cash flows. Additionally, competition in both the domain registration and fibre internet markets remains intense.
For investors willing to look beyond short-term pain and volatility, allocating $10,000 to Tucows stock could prove rewarding as the company continues executing its turnaround strategy and the market eventually recognizes its improved fundamentals. The combination of stable cash flows, improving margins, and strategic focus on deleveraging makes this beaten-down Canadian tech stock worth serious consideration for patient contrarian investors.
