Buy Espial ahead of Q3 results, says Clarus analyst Ofir

In a research update to clients this morning, Ofir reiterated his “Buy” rating and $4.00 one-year target price on Espial, implying a return of 108.3% at the time of publication.

Ofir says shares of Espial has been hit with a double whammy that has left the stock about 40% off its 52-week highs. In August, he notes, the company’s stock fell after Rogers and Shaw announced a new Over the Top (OTT) video service called Shomi. That downtick bled into into the current market malaise.

The analyst says he thinks the initial pullback was unwarranted and that recent announcements from CBS and HBO about their new OTT services “highlight the urgent need for operators to migrate to next generation set-top-box (STB) platforms, specifically RDK, in order to keep pace with these emerging trends”.

Ofir says Espial has a solid client base of recurring revenue, a strong pipeline of opportunities with tier-one operators, is profitable and has a strong balance sheet. For these reasons, he sees the company’s current shares price as a “significant buying opportunity”.

The analyst expects Espial will post adjusted EPS of $0.01 on a topine of $4.5-million in its third quarter, which it will report on Wednesday. His target, he says, is based on 16x his expectation of the company’s fiscal 2015 earnings.