Beaten down ViXS Systems is a buy, says Cormark

Shares of ViXS Systems (TSX:VXS) have taken it on the chin of late, but Cormark analyst Richard Tse says investors should take advantage of the current price of the stock, which he believes is much too low.

Last Wednesday, ViXS announced that a year-end audit revealed uncovered that billing of $1.5-million under a previously disclosed development arrangement in the third quarter would necessitate the company restating that quarter’s financials. For now, management says it is in a quiet period and will discuss the matter when it reports its fourth quarter and fiscal 2014 results after market close tomorrow.

Tse says that news was not helped by the fact that some of ViXS peers last week released outlooks that were revised downward. But the Cormark analyst says investors should take advantage of the more than 20% pullback, because ViXs is “at the crosshairs of a major secular industry trend in content delivery – namely 4K and HEVC.” He says there is no doubt these will become the “upcoming de facto standard” for content delivery and that ViXS is uniquely positioned to capitalize on this coming trend.

In a research update to clients this morning, Tse reiterated his “Buy” rating and $4.00 one-year target price on ViXS Systems.

Despite his long term belief in the viability of ViXS’ business, Tse says he expects a tough fourth quarter is on deck tomorrow. He thinks the company will lose $0.08 a share revenue of $8-million, below the street consensus of a five cent loss on a $10-million topline.

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