BSM Technologies negativity is a buying opportunity, says Paradigm

The bearish sentiment around BSM Technologies’ (BSM Technologies Stock Quote, Chart, News: TSXV:GPS) first quarter results creates an attractive entry point for investors, says Paradigm analyst Spencer Churchill.

On February 5th, BSM Technologies reported its Q1, 2015 results. The company lost $785,000 on revenue of $7.85-million, a topline that was down from $7.93-million in last year’s first quarter.

“Once again, we saw solid growth in our recurring revenue and subscriber base during the quarter,” said CEO Aly Rahemtulla. “Lat-Lon and JMM continued to perform ahead of our expectations. We shipped products to another major global construction customer with the potential to become one of BSM’s largest customers, and we further progressed our rail yard pilot installation. Looking to the remainder of fiscal 2015, we will continue to strategically invest to drive growth and profitability over the long term.”

Churchill says the quarter was better than he expected. He says expenses were a little higher than he had modeled, but that this was offset by revenue and margin strength. Although the analyst says he expects management will focus on expanding operating hardware margins and EBITDA, he warns that hardware margins and revenue could be lumpy going forward.

Still, Churchill’s investment thesis on BSM Technologies is a positive one.

“We believe BSM represents a compelling way for investors to gain exposure in the fast growing telematics space within several verticals where adoption remains very low,” he said.

In a research report to clients this morning, Churchill resumed coverage of BSM Technologies with a “Buy” rating and $2.25 target price, implying a return of 105% at the time of publication. The stock had been covered at Paradigm by the since departed Gabriel Leung.

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