NeuLion’s (NeuLion Stock Quote, Chart, News TSX:NLN) first quarter results were about as he expected, but improving gross margins have Cantor Fitzgerald Canada analyst Ralph Garcea raising his price target on the stock.
This morning NeuLion reported its Q1, 2016 results. The company earned $2.08-million on revenue of $26.3-million, a 21 per cent besting of the company’s topline from the same period last year.
“Revenue from our NeuLion digital platform grew 10 per cent on new customer additions and expanded usage from existing customers,” said CEO Kanaan Jemili. “Our Q1 results continue to highlight our scalable business model and significant operating leverage. As revenues increase, our costs increase at significantly lower rates. We continue to expand our efforts in the UHD 4K market, having completed four live OTT broadcasts of 4K content working with Univision, BT Sports and Mediapro. UHD 4K TV shipments with consumers are growing exponentially and this is key to the synergy we have created between our NeuLion digital platform business and our DivX CE licensing business with large manufacturers of UHD TVs.”
Garcea notes that NeuLion’s revenue came in below his estimate of $28.8-million, but Adjusted EBITDA of $7.0-million was better than the $6.3-million he had modeled. The analyst, however, says his eyes were on one key metric.
“Gross margin expanded 226bps y/y and 163bps q/q to 82%,” he points out. “Operating leverage is a key component in NLN’s business model and we see continued expansion in years to come.”
In a research update to clients today, Garcea maintained his “Buy” rating on NeuLion, but raised his one-year price target from $2.00 to $2.15, implying a return of 81 per cent at the time of publication.
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