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Cormark raises target on Mitel to (US) $16.00, maintains “Top Pick” rating

Canadian Stock News Cantech

Cormark analyst Richard Tse thinks the potential of Mitel’s cloud business remains under-appreciated. It’s go time for Mitel (TSX:MNW, NASDAQ:MITL), says Cormark analyst Richard Tse.

Last Thursday, Mitel reported its Q1, 2014 numbers. The company lost (US) $13.6-million on revenue of $241.5-million, a topline that was up 69% over last year. The newly acquired Aastra Technologies, which was part of Mitel for just two months after the pickup was completed on January 31st, contributed $89.3-million in revenue. Much of the loss was due to restructuring charges; adjusted EBITDA came in at $35.6-million.

Tse, noting that management increased its synergy target from $50-million to $75-million, says the integration of Aastra is ahead of schedule. He thinks this fact, coupled with the under-appreciated potential of Mitel’s cloud business, means the company’s stock remains undervalued. In a research update to clients Friday, Tse maintained his Top Pick rating on Mitel, but raised his one-year target price on the stock from (US) $12.50 to $16.00.

The Cormark analyst says that with a legacy subscriber base of more than 60-million, Mitel has plenty of runway to move these customers to the cloud. He notes that the company has a direct sales model that is complemented by a wide range of cloud products sold through VARs and service providers, so the path to market is clear.

Tse believes Mitel will earn $1.04 a share on revenue of $1.15-billion in fiscal 2014, and expects that number will climb to $1.51 a share on a topline of $1.25-billion the following year.

At press time, shares of Mitel on the Nasdaq were up 7.76% to $11.67.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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