Tucows still has upside, says Cantor Fitzgerald Canada

Shares of Tucows (Tucows Stock Quote, Chart, News: TSX:TC, Nasdaq:TCX) have more than bucked the overall downward market trend in 2015, but Cantor Fitzgerald Canada analyst Scott Fitzgerald thinks the company still has upside.

Last Thursday, Tucows reported its Q3, 2015 results. The company earned (U.S.) $3.15-million on revenue of $44.55-million, a topline that was up 14.5% over the same period a year prior.

“Continuing solid performance from our domains business and increasing contribution from Ting Mobile resulted in a record quarter for both revenue and adjusted EBITDA,” said CEO Elliot Noss. “The operating leverage in our business model contributed to 43 per cent year-over-year growth in adjusted EBITDA for the quarter to a record $7-million, bringing our total for the first nine months of the year to $19.3-million, representing 68-per-cent growth from the same period last year and well above our total for all of 2014.”

Curtis notes that the quarter was in-line with his expecations. The analyst says the company’s move to diversify its business in 2012 by launching wireless service provider Ting, is on more than solid footing.

“Ting Mobile business now contributes over 37% of consolidated sales (versus 25% last year),” points out the analyst. “Tucow’s domain business continues to deliver stable cash flow to support business development of its gigabit fiber initiative (Ting Internet).”

In a research update to clients today, Curtis maintained his “Buy” recommendation and (U.S.) $36.00 (C$45.00) one-year target price on Tucows, implying a return of 31% at the time of publication.