Many techs that have gone public most recently in Canada, such as ViXS Systems, have underperformed in 2014.
Halfway through the year, a curious pause has set over Canadian tech.
After two years of pacing the markets, our tech sector has made headlines for some notable pullbacks of late. Former high-fliers such as Avigilon have taken their lumps and left shareholders awaiting the next leg of growth.
The recent actions of Amaya Gaming, however, remind just how quickly things can change in tech. That company’s hyper-aggressive acquisition of the company that owns the Poker Stars and Full Tilt Poker brands sent its stock soaring. With a slate of high profile IPOs presumably set to trickle out this fall, and many looking at quality names that have been beaten down as attractive entry points, there is every reason to believe that tech can resume its previous trajectory.
For those looking in the bargain bin, we count down the TSX Tech Sector Stocks that have performed the worst so far in 2014.
1. ViXS Systems (TSX:VXS)
Price on December 31st, 2013 $3.00
Price on June 18th, 2014: $1.40
Percentage Change: -53.3%
The newly public ViXS Systems continued its slide earlier this month after reporting a Q1 in which it lost $5.08-million on revenue of $7.4-million. While CEO Sally Daub says the company’s investment in cutting edge technology will set it up for future gains, Cantor Fitzgerald Canada analyst Blair Abernethy says the ramp up in customers moving away from legacy solutions to ViXS next-gen offerings won’t be as steep as he previously expected.
2. EQ Inc. (TSX:EQ)
Price on December 31st, 2013 $.048
Price on June 18th, 2014: $0.25
Percentage Change: -47.9%
Toronto-based digital media player EQ Inc. has trickled off for most of 2014 after a rebound last summer carried over into the winter. In March, the company reported fourth quarter 2013 results in which its top and bottom lines were both double digit gains. But while CEO Geoffrey Rotstein said the company was making progress with its audience targeting solutions, investors were clearly expecting more.
3. Baylin Technologies (TSX:BYL)
Price on December 31st, 2013 $7.20
Price on June 18th, 2014: 4.01
Percentage Change: -44.3%
Another stock that has underperformed since its IPO, Baylin’s share price has picked up since its May lows. Baylin began trading November 27th after raising $50-million by selling 6.25-million shares at $8.00, but has spent its entire life as a public company below that mark. But Paradigm Capital analyst Daniel Kim says Baylin is uniquely positioned as the world’s sole publicly traded pure-play antenna company.
4. Halogen Software (TSX:HGN)
Price on December 31st, 2013: $13.15
Price on June 18th, 2014: $8.01
Percentage Change: -39.1%
May 2013’s IPO of Ottawa’s Halogen Software, in which the company raised just over $50-million by selling 4,365,218 shares at $11.50 each, was said to be extremely oversubscribed, and the demand appeared to fuel a post-IPO run that saw the company’s stock rise as high as $15.75 by last summer. But shares of Halogen fell sharply in February when the company issued guidance it said was in-line with analyst expectations, and have trailed off since.
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5. Urthecast (TSX:UR)
Price on December 31st, 2013: $2.17
Price on June 18th, 2014: $1.35
Percentage Change: -37.8%
Clarus Securities analyst Eyal Ofir says the uncertainty in the Ukraine and commissioning delays have impacted Urthecast’s stock and presented an attractive entry point for investors. The analyst, who has a “Speculative Buy” rating and $5.50 one-year target price on Urthecast, says there a several upcoming potential catalysts, including the impending commercial availability of its Medium Resolution Camera and the upcoming release of its Ultra HD video camera. The Clarus anlaysts says that once the latter is commissioned, Urthecast could be an attractive takeout candidate for internet companies such as Facebook, Yahoo!, or Baidu.
6. International Datacasting (TSX:IDC)
Price on December 31st, 2013: $0.14
Price on June 18th, 2014: $0.095
Percentage Change: -32.1%
Ottawa’s International Datacasting, which has gone through countless management shuffles in recent years, continues to fall in the face of soft quarters. The company’s Q1, 2015, reported earlier this month, revealed revenue of $2.8-million, down 47% over the same period a year prior. CEO Doug Lowther said the quarter was below his expectations, but that the company has made progress in restructuring its business and expects to return to profitability this year.
7. AgJunction (TSX:AJX)
Price on December 31st, 2013: $1.14
Price on June 18th, 2014: .82
Percentage Change: -28.1%
PI analyst Pardeep Sangha says weakness in the overall agricultural industry was the main culprit behind a recent warning from AgJunction management that its Q2 would be softer than expected. Management does, however, expect the company will be profitable in 2014.
8. Intermap (TSX:IMP)
Price on December 31st, 2013: $0.41
Price on June 18th, 2014: $0.305
Percentage Change: -25.6%
After trimming its once considerable losses, digital mapping company Intermap, which was hammered during the worldwide financial crisis of 2008 and 2009, experienced a brief respite as its stock rose to a recent high of $0.54 early in 2014. After trailing off for most of the year, shares of the company have perked up again in June.
9. 01 Communique (TSX:ONE)
Price on December 31st, 2013: $.345
Price on June 18th, 2014: $.26
Percentage Change: -24.6%
Shares of volatile 01 Communique move in lockstep with the results and perception of results the company achieves in the courtroom, defending its remote access IP. 01 spiked last October after the Patent Trial and Appeals Board affirmed the validity of the Company’s patent number 6928479 (the “479 Patent”), which was perceived as a victory in its case against Citrix. But shares fell earlier this month when The United States Court of Appeals for the Federal Circuit affirmed the district court’s finding that LogMeIn did not infringe 01 Communique’s patent. “We are disappointed with the finding of non-infringement but believe that decision is limited to that case,” said CEO Andrew Cheung.
10. Avigilon (TSX:AVO)
Price on December 31st, 2013: $30.75
Price on June 18th, 2014: $25.16
Percentage Change: -18.2%
The tough questions began at about six in the morning, eastern time, on May 7th, just a few hours after the announcement.What does this mean? Why now? Is there more to follow? The press release was from Vancouver’s Avigilon and the news was that its CFO, Brad Bardua was leaving the company for health reasons. Taken by itself, this would have raised eyebrows, nothing more. But the fact that the news fell on the same day the company was to report its Q1, 2014 results turned Avigilon’s stock upside down. The Financial Post noted that Bardua was the third executive to leave the company in six months. By the time the dust had settled, about a third of Avigilon’s market cap had been erased and a several analysts had cut their price targets on the stock. The maelstrom also obscured the fact that the company’s first quarter results were, in fact, quite strong.
Disclosure: Cantech Letter’s Nick Waddell purchased 35,000 shares of 01 Communique at $.235 on March 28th, 2013.
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