PI’s Pardeep Sangha raises target on Absolute Software, but keeps Neutral rating

This morning, Absolute Software (TSX:ABT) reported its Q2, 2013 results. The company operating income rose from Q2, 2012’s $2.9-million to $3.5-million, and sales contracts increased to $22.5 million from last year’s $20.7-million.

Absolute CEO John Livingston said the company is benefiting from a flexible business model.

“We continue to gain sales traction with corporate and health care customers as they increasingly realize the benefits our offerings provide for governance, risk management and regulatory compliance,” he said. “This trend fueled our sales contract growth in the quarter, including the signing of the largest contract in our history with a Fortune 100 health care company. More broadly, the marketplace continues to go mobile. From inception, Absolute has focused on solving mobile computing security and management challenges. With the addition of Absolute Service, and continuing wins for our persistence technology on Windows and Android tablets, we continue to expand our offerings to manage and protect any device on any platform. This remains unique in the new mobile IT paradigm.”

PI analyst Pardeep Sangha characterizes this quarter as “slightly positive” for Absolute. He says that while he believes there are headwinds presented by an extremely challenging PC sales environment, he does believes the company can become increasingly profitable in fiscal 2014. In a research update to clients this morning, Sangha maintained his NEUTRAL rating on Absolute Software but raised his target price by $.50, to $5.50.

Sangha notes that Absolute is now shipping on Windows 8 tablets through Dell, HP and and Lenovo. He says management is expecting these devices will take some market share back from Apple’s iPad in the education vertical, and he expects this will lead to a stronger performance by Q1, 2014.

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