Shares of Sierra Wireless (TSX:SW) have had a tremendous run this year but the party might not be over, says Cormark analyst Richard Tse.
In a research update to clients this morning, Tse reiterated his BUY rating, but raised his one-year price target on the stock to $22, up from his previous target of $15. The Cormark analyst says that while his underlying estimates of the company have not changed, attitudes about the space it operates in have.
Tse says the M2M space is now being recognized as one of the large secular themes in technology, along with themes like cloud -based computing and big data. He says there is a real scarcity of pure play M2M names and the others that do exist, such as CalAmp and Telit, have also enjoyed strong years to date.
In August, Sierra Wireless reported its Q2, 2013 results. The company earned (U.S.) $61.41-million on revenue of $109.6-million, up 14.9% over last year’s Q2, and a record. The company will report its third quarter results on November 7th.
Tse says Sierra Wireless is currently the top player in M2M modules, with 34% of the market, and is now expanding its presence into software and services. He notes that other players in the vertical trade at more than one times Enterprise Value/Sales, while Sierra Wireless trades at 0.9x EV/Sales. His $22 target is derived from applying a 1.0x EV/Sales valuation to Sierra Wireless.