Clarus launches coverage of ViXS with Buy rating, $3.30 target

The 4K TV market represents “a significant opportunity” and Toronto’s ViXs Systems (TSX:VXS) is poised to grab a meaningful share of it, says Clarus Securities analyst Eyal Ofir.

In a research report to clients today, Ofir launched coverage of ViXS with a “Buy” rating and a one-year price target of $3.30, implying a return of 74.6% at the time of publication.

Ofir notes that the story of ViXS over the past few years has been all about its investment into next-gen broadcast technologies. He says the company’s aggressive positioning in next generation video and compression technologies has put it in a “unique leadership position in front of a burgeoning new market opportunity.”

Ultra HD, says Ofir, is the next upgrade cycle for television, and has been supported by the industry as such. ViXS’ System-on-Chip (SoC) solutions, he says, will become increasingly important in the marketplace as Ultra HD become more widespread. He sees a “meaningful level of consumer uptake” taking place soon, perhaps spurred by the upcoming holiday season.

The Clarus analyst thinks ViXS could ultimately own a 10-15% market share in the 4K TV market. Based on industry forecasts, he notes, this could translate into $55-80 million in revenue per year by 2016.

Ofir notes that since going public ViXS has declined more than 50%. While he acknowledges that the company has underperformed against financial expectations, he thinks the culprit is legacy revenues, which have declined at a faster rate than expected.

Ofir says his target price based on 12x his estimate of ViXS’ 2016 EPS.