There’s a lot more gas left in Sandvine’s tank, says Cormark

Cormark analyst Richard Tse says a change has happened at Sandvine. While many, he says, wondered whether the company’s history of losses was proof that its business model was scalable, Sandvine has now put together a string of impressive quarters that may have laid those fears to rest.Despite the strong run in Sandvine’s (TSX:SVC) share price this year the stock still has more upside, says Cormark analyst Richard Tse.

Yesterday, 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 Q3.

Tse says a change has happened at Sandvine. While many, he says, wondered whether the company’s history of losses was proof that its business model was scalable, Sandvine has now put together a string of impressive quarters that may have laid those fears to rest.

The Cormark analyst says for him, the biggest takeaway from Sandvine’s Q3 was profitability. He says he expected the company to earn $0.02, as did the street. The $0.04 in operating EPS the company actually reported has him redrawing his expectations for Sandvine’s future. Tse says he now thinks the company is “finally hitting its stride”.

In a research update to clients this morning. Tse maintained his TOP PICK rating on Sandvine and raised his one-year price target to $3.50, up from his previous target of $2.75.

So what has actually changed to make Sandvine more profitable and growth-ready? Tse says the company as late as last year was battling two major issues. The first he says, was partner changes, which are now long in the past. The second issue, he says, is not as well understood.

Sandvine, says Tse, was impaired by limitations with its product and its operational structure. He says these are now being addressed with notable improvements to Sandvine’s product user interface and a merge of its customer service and sales organizations, which have created a more responsive sales group. He says these changes have resulted in a faster turnover in the company’s order book, and left it better prepared to handle a wider pipeline of business.

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