Cormark’s Richard Tse raises target on Sierra Wireless to $13.50

Tse says the divestiture of the mature legacy business that was Sierra’s AirCard division should increase both its growth and profitability. He points out that the M2M business grew 30% faster than the AirCard business over the past year, despite a troubled European economy.Yesterday, Sierra Wireless (TSX:SW) reported its Q4 and fiscal 2012 results. For the year, the Vancouver-based company earned (US) $27.19-million on revenue of $397.3-million, which was a 19.3% bump over 2011’s $333.2-million topline.

Sierra Wireless CEO Jason Cohenour said the company’s ongoing focus on the M2M space will continue to pay dividends.

“Our fourth quarter results highlight our continued solid revenue growth and improving earnings,” he said. “As the global leader in machine-to-machine and connected device solutions, we believe that we are exceptionally well positioned to drive profitable growth both organically and through strategic acquisitions.”

Cormark analyst Richard Tse says the company’s Q4 results -its revenue of $109.4-million was up 32.8% over last year’s Q4- was in line with what he expected. The big news, of course, was the proposed sale of its AirCard unit to California-based Netgear announced late last month. Tse says that sale further sharpens Sierra’s M2M focus and will allow the company to be even more aggressive with its strategy than it has been. In a research update to clients this morning, Tse reiterated his BUY rating on Sierra Wireless and raised his target to $13.50, up $1.50 from his previous target.

Tse says the divestiture of the mature legacy business that was Sierra’s AirCard division should increase both its growth and profitability. He points out that the M2M business grew 30% faster than the AirCard business over the past year, despite a troubled European economy. Tse believes growth could be much higher going forward. What’s more, he says Tse, the company could command a higher valuation now that it is a M2M pure play.

Click here for Cantech Letter’s recent interview with Sierra Wireless CFO David McLennan.

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