A disappointing quarter has PI analyst Pardeep Sangha cutting his price target on Avigilon (TSX:AVO).
Yesterday, Avigilon reported its Q1, 2015 results. The company earned $11.06-million on revenue of $75.4-million, a 35% bump over last year’s Q1 topline of $55.8-million.
“Avigilon delivered strong revenue growth and record gross margin in the first quarter, a testament to our competitive differentiation and proven business model,” said CEO Alexander Fernandes. “We also continued to make substantial investments in the business to drive ongoing growth, as we remain committed to achieving our stated goal of $500-million in annual run-rate revenue by the end of 2016.”
Sangha says he continues to like Avigilon, but notes that the quarter missed both his and the consensus estimates. He notes that the company continues to aggressively increase its operating expenses to support future growth. Longer term, the analyst says he does not doubt Avigilon can reach its lofty goals.
“Management continues to be confident that Avigilon can achieve a $500M revenue run rate by the end of 2016, and does not see any softening or weakness in the business,” said Sangha. “Q2 is a seasonally stronger quarter than Q1; hence, we are forecasting record revenue of $85.4M. We are forecasting overall revenue growth of 31% in FY15 and 24% in FY16.”
In a research update to clients today, Sangha maintained his “Buy” rating on Avigilon, but reduced his one year price target from $32.00 to $29.00.