Ahead of Q3 numbers, Canaccord Genuity’s Young maintains $19 target on Halogen

The talent management software space is growing and Halogen Software (TSX:HGN) is positioned to capture a meaningful part of the lucrative middle market, says Canaccord Genuity analyst Robert Young.

Today, after market, Halogen will report its Q3, 2013 results. The company is following up on a Q2 in which it lost (U.S.) $2.73-million on revenue of $10.1-million, up 26% from the same period a year prior.

Young expects the losses will continue at Halogen, but that the company’s topline will grow. He thinks Halogen will post an EBITDA loss of $1.8-million on revenue of $11.9-million, up 22% from last year’s third quarter.

The Canaccord Genuity analyst says that while Halogen has competitors, they are tending to fall on either side of its sweet spot.

SAP, he says, has noted recent success with its SuccessFactors offering, and is likely targeting customers on the larger end of the spectrum. And Netsuite’s recent acquisition of Waterloo-based Tribe HR, while “clearly competitive to Halogen” is focused predominantly on smaller customers.

The larger picture, says Young, is that the market penetration in the talent management space is very low and large enough to support multiple players.

In a research update to clients on November 4th, Young maintained his BUY rating and one-year price target of $19.00 on Halogen Software.

At press time, shares of the company were down .7% to $13.60.

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