Sierra Wireless has the potential to go “way higher”, says Cormark

After a “blowout” third quarter performance, Cormark analyst Richard Tse is giving a “Buy” rating back to Sierra Wireless (Sierra Wireless Stock Quote, Chart, News: TSX:SW, Nasdaq:SWIR).

On Wednesday, Sierra Wireless reported Q3 results in which it lost (US) $2.9-million on revenue of $143.3-million, a topline that was up 27.6% over the same period last year. The company also said it would get into the black in Q4. Guidance provided by management said it expected to earn between $7.9 and $8.8-million on revenue that will fall between $145-million to $148-million in that quarter.

Tse says Sierra Wireless was one of his favourite names of 2013, but explains that after a strong run in the stock he downgraded it to a “Hold” rating in January. That, says the analyst, was a mistake. Tse says he didn’t take into account the potential for the company’s operating leverage to grow considerably. Now, he says acquisitions and accelerating revenue has the potential to make shares of Sierra go higher. “Way higher”, he says.

Ina research update to clients following the Q3 results, Tse raised his target on Sierra from (US) $23.000 to $42.00 and changed his rating to “Buy” from “Market Perform”.

“Sierra Wireless continues to be one of the best positioned names in the growing M2M market”, says Tse, adding: “and while the stock is not inexpensive, revenue growth is accelerating. And tech stocks are usually positive particularly when they come with expanding margins”.

At press time, shares of SWIR on the Nasdaq were down 3.3% to $33.48.

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