Baylin Technologies’ (TSX:BYL) considerable IP in antenna solutions could lead to a brighter future, but price competition and a spotty recent track record mean investors looking at the company would be wise to take a pass for now, says Cormark analyst Richard Tse.
Last Thursday, Baylin reported its Q1, 2015 results. The company lost (U.S.) $5.75-million on revenue of $7.9-million, down from $11.2-million in the first quarter of last year.
“Our inclusion on the Samsung S6 platform is a strong testament to our design and technological expertise,” said interim CEO Randy Dewey. “However, the overall mobile industry continues to face mounting pricing pressure. This is driving down average antenna selling prices, industrywide, which is reflected in our results for the quarter. Broadband and infrastructure sales were relatively in line year over year. We remain optimistic about the long-term growth prospects of both these verticals, but continue to face near-term delays in industry spending across the infrastructure market.”
Tse says the results came in below his expectations on both the top and bottom line. He concurs that the company is currently facing pricing pressures and industry headwinds. Though he describes Baylin’s current valuation as “compelling” he says he is waiting for more evidence on execution.
“As far as we can tell, the company is in the midst of a transition between market segments which comes with meaningful risk given its recent track record. We believe investors should stick to the sidelines given that risk and track record until we see some tangible proof points on execution,” said the analyst.
In a research to update to clients last Friday, Tse maintained his “Market perform” rating but lowered his one year target price from $4.50 to $3.50 on Baylin Technologies.