Espial deal is “transformational” says Global Maxfin analyst Garcea

Global Maxfin Capital analyst Ralph Garcea says the deal Espial (TSX:ESP) announced this week is “transformational” and should lead to other similar contracts.

Yesterday, Espial announced it had signed a multi-year agreement with an unnamed tier-one North American cable operator to provide and “out-of-the-box HTML5 user experience for TV, tablets and smart phones.”

CEO Jaison Dolvane said the deal was not just a moral victory, but a win for Espial’s bottom line.

“This contract represents a significant financial win for Espial and reinforces Espial’s product leadership,” he said. “Traditional telecom competition along with new Internet entrants like Netflix, Hulu and Amazon are challenging incumbent cable service providers. This is accelerating cable’s transition to IP as a platform to allow them to effectively compete and rapidly innovate. Espial’s strong product focus in this market, our work with Comcast as an RDK licensee and our continually increasing HTML5 leadership positions us very well to capitalize on this lucrative market opportunity.”

Garcea estimates the contract, which is Espial’s largest ever, could be worth $15 to $20-million over the next three to five years, with an incremental $2-3 million in recurring maintenance revenue.

The Global Maxfin Capital analyst says that an HTML5 platform is the right solution at the right time because it reduces content providers required investment and opens the door to new services and revenue streams.

In a research update to clients this morning, Garcea maintained his STRONG BUY rating, but raised his one-year price target on Espial to $1.50, up fifty cents from his previous $1.00 target.

At press time, shares of Espial were down 4.5% to $.64.

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