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Sandvine upgraded to a BUY by M Partners analyst Shuttleworth

Sandvine

 

Sandvine
M Partners’ analyst Ron Shuttleworth says Sandvine’s channel strategy has grown stronger and is finally beginning to create earnings leverage. He now believes the company’s expense ratio will fall to approximately 60% from 62% for the second half of fiscal 2013; a reduction in expenses of about $3-million.

M Partners analyst Ron Shuttleworth says Sandvine’s (Sandvine Stock Quote, Chart, News: TSX:SVC) Q2 numbers fell short of his expectations, but he thinks the outlook for the company is better than it has been in some time.

Yesterday, Sandvine reported a Q2 in which it earned (U.S.) $892,000 on revenue of $23.5-million in the quarter, following up on a Q1 in which it earned $1.7-million on revenue of $25-million.

Shuttleworth says Sandvine’s revenue, which fell below the company’s own internal expectations, also fell short of his. He thought the company’s topline would come in a $25-million, slightly below consensus, which was $25.3-million.

But the M Partners’ analyst says Sandvine’s channel strategy has grown stronger and is finally beginning to create earnings leverage. He now believes the company’s expense ratio will fall to approximately 60% from 62% for the second half of fiscal 2013, a reduction in expenses of about $3-million. This, along with increased revenue means Shuttleworth’s EBITDA forecast for 2013 has been bumped from $12.8-million to $19.8-million. The result is an upgrade; in a research report to clients this morning, Shuttleworth raised his one-year target on Sandvine to $2.40, up sixty cents from his previous $1.80 target. He has upgraded the stock from HOLD to BUY.

Shuttleworth says that because there is limited recurring revenue in Sandvine’s business model, the company is especially sensitive to macro-economic conditions. But this factor may now be working in Sandvine’s favour, as Europe, Middle East and African may now begin to allocate a larger part of their budgets to the company’s services, although he cautions that a flare-up in the Euro credit crisis could derail said spending.

At press time, shares of Sandvine were up 2.1% to $1.99.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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