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Analyst Ron Shuttleworth raises target on Sandvine

Sandvine CEO Dave Caputo.

Sandvine CEO Dave Caputo.Sandvine’s (TSX:SVC) maturing channel partnership is creating greater earnings leverage for the Waterloo-based company, says M Partners analyst Ron Shuttleworth.

Last week, Sandvine reported its Q3, 2013 results. The company earned $4.65-million (U.S.) on revenue of $27.2-million, a topline that was up 25% over last year’s thrd quarter.

Shuttleworth says Sandvine Q3 EBITDA of $6.5-million was $1.0-million ahead of our forecast of $5.5-million and $1.6-million better than street consensus.

While revenue fell short of his estimate of $29-million, the company made up for this, he says, with gross margins that came in at 76%, which was 5% above his estimate and resulted in gross revenue of $20.6-million, in line with his estimate.

The M Partners analyst says there is very little recurring revenue in Sandvine’s business model, which makes its especially sensitive to macro-economic conditions. This has hurt the company in recent times, but Shuttleworth says an environment where the European debt crisis is receding and Asia-Pacific opportunities are emerging will make this flaw in the company’s business model less prominent.

In a research update to clients following the quarterly results, Shuttleworth maintained his BUY recommendation and increase our 12-month share price target to $2.60, up from his previous target of $2.40.


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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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