Espial Group’s Orange TV Stick deal will increase its addressable market, says Euro Pacific

Euro Pacific analyst Rob Goff says Espial Group’s (Espial Stock Quote, Chart, News: TSX:ESP) deal with Orange to supply a internet enbaled HDMI dongle is a new device with the same goal.

This morning, Espial announced that Orange has launched a streaming device based on Espial’s HTML5 Client software. The Orange TV Stick, which will compete with devices like the Chromecast stick, provides over-the-top video services apps and video-on-demand portals.

“We’re excited to work with Orange — one of the world’s most visionary network operators — on innovative services for their customers,” said CEO Jaison Dolvane. “Leveraging our software, Orange has created a world-class video user experience, which will give them competitive advantage, as well as a platform, which can be enhanced rapidly to incorporate new services and applications. For Espial, this represents the expansion of our solution onto HDMI-based devices.”

Goff says the Orange Stick is an alternative to set top boxes and smart TVs that should help expand Espial’s reach. But the analyst says he is taking a wait-and-see approach on the potential economic impact of the deal.

“The revenue generating model and as a result the full extent of the revenue impact remains unclear,” he said. “With a consumer device (like TV) Espial is set to receive a royalty on every device shipped, as it does at TV OEMs. Yet, Orange is a service provider that might be able to build a new service around the Orange TV with potential recurring revenue opportunities at Espial. We look for greater details on the announcement.”

In a research update to clients today, Goff maintained his “Buy” rating and $4.80 one-year target price on Espial, implying a return of 28.4% at the time of publication.

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