Byron’s Tom Astle initiates coverage of Counterpath with a $3.25 target

Byron Capital analyst Tom Astle says that after many years of building out its platform, the Donovan Jones led Counterpath seems to be on the cusp of becoming as major softphone enterprise vendor.

In the space of a couple years, Vancouver’s Counterpath (TSXV:CCV) has gone from idea stock to fledgling wireless contender. The company’s share price has raced as its topline expanded. Last week, Counterpath announced it will follow other Terry Matthew’s chaired concerns Mitel and Dragonwave, and will list it shares on the Nasdaq starting July 11th.

Today, more evidence that the company is adding believers.

Byron Capital analyst Tom Astle says that after many years of building out its platform, Counterpath seems to be on the cusp of becoming as major softphone enterprise vendor. Astle says the Donovan Jones led company “…appears to be emerging as a strategic vendor of technologies that carriers, other vendors and enterprises use at the crossroads of Voice, Mobility and IP”. In a report to clients today, Astle initiated coverage of Counterpath with a Speculative BUY rating and $3.25 target.

Counterpath was founded in 2002, and came to public attention in 2007 when telecom legend Terry Matthews became its chairman, a role he maintains today. After years of building out its suite of patented softphone products, such as Bria and X-Lite (which became the most popular free softphone in the world in 2009 when it reached 340,000 downloads a month), the company’s revenue has begun to climb of late. Counterpath’s recently reported Q3 numbers were a record $3.5-million, which was an increase of 15% over the $3-million it reported in the same period a year prior.

Astle says that like many early stage plays, it’s hard to peg the true value of Counterpath. With the stock trading at just under five times this year’s estimated revenue and about twenty-five to thirty-five times earnings estimates, Astle says Counterpath isn’t exactly made for Warren Buffet disciples. But, he says, the company’s very real potential for wins similar to its recent deal with Rogers means Counterpath could earn as much as $.20 cents a share, which he thinks translates into a $4 stock.

Shares of Counterpath closed today up 1.9% to $2.75.