Redknee is still a buy, says Cantor Fitzgerald Canada’s Kew

This morning, Redknee reported its Q1, 2014 results. The company lost (U.S.) $3.06-million on revenue of $60.4-million, a topline that was up 324% over last year’s Q1. The results, says Kew, were generally in line with his expectations.

CEO Lucas Skoczkowski focused on the integration of the company’s landmark acquisition of assets from Nokia Siemens Network.

“As we bring the integration of our latest acquisition to its completion, we are increasingly focusing on growing our sales pipeline and order backlog, as we observe a healthy demand for upgrades and strong sales momentum,” he said. “In addition, we will continue to deliver a high-quality customer service, while we drive cross-selling and increasing revenue opportunities with our existing customer base, as well as acquiring new customers.”

Kew says Redknee’s Q1 provided confirmation that it is capitalizing on the opportunity to execute on license upgrades that the Nokia Siemens Networks pickup provided. He points to two recent wins, one in January, one in December, as evidence.

The Cantor Fitzgerald analyst thinks management’s goal to bring their business to mid-single digit EBITDA margins in the first year after the acquisition and then into the mid-teens in the twelve months after that is too conservative, noting that this, the third quarter of contributions from NSN, saw Redknee post margins of 9%.

In a research update to clients this morning, Kew maintained his BUY recommendation and $7.75 one year target on Redknee.

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