Fresh off a strategic review that will see the company look to limit the outright purchase of patent portfolios and perhaps sell some of its “non-core” patents, Wi-LAN (TSX:WIN, Nasdaq: WILN) is undervalued, says Cantor Fitzgerald analyst Blair Abernethy.
In a research update to clients this morning, Abernethy maintained his “Buy” rating and (U.S.) $4.50 one-year target on Wi-LAN. The analyst says there are several potential catalysts that could unlock the value in the Ottawa-based company’s stock over the next year, including an aggressive share buyback, large license deals, and the divestiture of its patent portfolio.
Yesterday, Wi-LAN announced it had acquired a portfolio of medical patents that relate to Stent technology, the company’s first foray into medical technology. Also announced was the renewal of its license deal with Archos relating to Wi-Fi technologies. While Abernethy doesn’t see the Archos deal as material he does see value in these types of deals because he says they bring validity to Wi-LAN’s long term objective of doubling its recurring revenue base.
Abernethy says that at 2.4x his fiscal 2015 EV/Sales estimate, Wi-LAN is attractively priced compared to its peers, which trade at 2.5x to 4.5x EV/Sales. At $3.33 per share, he notes, the company is trading at approximately the value of its cash and order backlog, about $140-million and $275-million, respectively.
Shares of Wi-LAN on the Nasdaq closed today down .33% to $3.04.
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