Cormark Securities: we're back on board with Sierra Wireless

After three consecutive missed quarters, Cormark Securities analyst Richard Tse says he is back on board with Sierra Wireless (TSX:SW, Nasdaq:SWIR).
Yesterday, Sierra Wireless reported its Q1, 2016 results. The company earned (U.S.) $718,000 on revenue of $142.8-million, a five per cent decrease from the topline the company posted in the same period last year.
“Revenue and non-GAAP earnings in the first quarter were slightly better than expected, and we continue to expect our business to gain strength over the course of the year, as new customer programs move into production, and we introduce new leading-edge IOT products and solutions,” said CEO Jason Cohenour.
Tse says the quarter was in-line with expectations, with revenue besting his estimate of $140-million and in the range of the company’s guidance of $135-145-million. But the analyst says this seems to be the beginning of something better.
“We heard a significantly more upbeat tone from management’s conference call where that renewed confidence seemed to be supported by some increased revenue visibility going into H2/F16 care of a backlog and +40 programs (former design wins) that’s expected to roll out in 2016,” says Tse. “Pair that with a return of a large automotive customer who had pared back spending in recent quarters and it would appear the outlook for the remainder of this year looks pretty clear which historically has bode well for this stock. Moreover, we also like what appears to be some momentum in the company’s Cloud and Connectivity Services which was up considerable Y/Y (+92%). At a valuation of 0.5x EV/S, 6.1x EV/EBITDA and 13.1x P/E on F2017E, we believe the results and expectations for an improving outlook is positive for the stock.
In a research update to clients today, Tse upgraded Sierra Wireless from “Market Perform” to “Buy” and raised his one-year price target on the stock from (U.S) $12.50 to $20.00.