ViXS Systems rating cut to “hold” at Cantor Fitzgerald Canada

Cantor Fitzgerald Canada analyst Blair Abernethy says the ramp up in customers moving away from legacy solutions to ViXS (TSX:VXS) next-gen offerings won’t be as steep as he previously expected.

Yesterday, ViXS reported its Q1, 2015 results. The company lost $5.08-million on revenue of $7.4-million.

CEO Sally Daub said the company’s investment in cutting edge technology will set it up for future gains.

“ViXS made a strategic decision to invest early in technologies that we saw disrupting the global video industry, and, as a result, we are the first and only commercially shipping solution to support both UHD 4K 60p and 10-bit HEVC,” she said. “Our customer wins, Intel partnership and incremental revenue from new products in [first quarter 2014] clearly demonstrate that our investment is starting to pay off, and we expect that UHD and HEVC will drive continued revenue and earnings growth for years to come.”

Abernethy says the quarter missed both his top and bottom line expectations. He had the company pegged for a $3.5-million loss on revenue of $9.9-million. His notes that his target was more optimistic that consensus expectation of a $3.8-million loss on revenue of $8.4-million.

In a research update to clients this morning, Abernethy said another missed quarter and a slowdown in design wins has led him to revise his estimates on ViXS and downgrade the the company from “Buy” to “Hold”. He assigned a fair value range of $1.25 to the stock.

For fiscal 2015 he now expects ViXS will lose $14.3-million on revenue of $41.7-million. The Cantor analyst had expected that the company would lose $700,000 on revenue of $67.8-million.

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