EXO U is undervalued, says Mackie Research Capital

EXO U (TSXV:EXO) is a disruptive recurring revenue model company in the education and enterprise verticals, says Mackie Research Capital analyst Nikhil Thadani.

In a research report to clients this morning, Thadani initiated coverage of EXO U with a “Speculative Buy” recommendation and a one-year target price of $6.00, implying a return of 52% at the time of publication.

Thadani says the trend that sees students and teachers using their own devices in the classroom is a global one. He cites one report that says the market opportunity for software solutions facilitating classroom software could now total $4-billion annually. The analyst thinks EXO U is naturally positioned to capitalize on this trend.

Developing apps that can be used by multiple users, says Thadani, is becoming more, not less, complex. He points to the Android platform, which has become increasingly fragmented, with multiple versions in operation and countless interfaces laid on top of them. He thinks that as mobile app development becomes more complex, demand for solutions that deploy and manage them will rise.

Founded in 2010, Montreal-based EXO U is an enterprise mobility player focused on delivering a technology agnostic framework that brings a native level of usability to apps across multiple platforms. The company’s software allows for apps to be developed once then deployed across a variety of operating systems, bringing greater efficiency to often fragmented markets.

Although EXO U is currently pre-revenue, Thadani thinks the company is on the very cusp of recurring revenue generation. He expects it will partner with original equipment manufacturers and value added resellers, publishers and system integrators to grow revenue. He thinks this channel partner model should result in EBITDA margins of more than 50% in about two years. He thinks the company’s revenue will grow from $36.2-million in fiscal 2016 to $97.6-million the following year.

Below: EXO U at the 2014 Mobile World Congress: