Mackie Research Capital upgrades Espial to "Buy"

After attending an event in Lisbon that saw cable operator NOS launch new Set Top Boxes (STBs) with Espial (Espial Stock Quote, Chart, News: TSX:ESP) software, Mackie Research Capital analyst Nikhil Thadani is feeling bullish about the Ottawa-based company.

This morning, Espial announced it had deployed its next-gen internet protocol video service with NOS, Portugal’s primary cable operator, which serves more than 1.5 million households.

“We saw our true competition was emerging from the Internet and recognized we needed to work with an industry-leading partner to redefine the user experience for Portuguese consumers,” said Pedro Bandeira, head of development at NOS. “After a rigorous selection process, we chose Espial who has been an exceptional integration partner and technology partner. The Espial G4 STB client, based on RDK, is the foundation of our new, game-changing service.”

Thadani says today’s event will serve as a catalyst for better things in Espial’s future.

“(Espial’s) market position and investment thesis underpinning ESP stock materially improved,” says the analyst. “Today’s first ESP contract deployment is the catalyst investors have been awaiting eagerly for months. Past delays, which we suspect stemmed from customer deployment schedules/constraints, caused material ESP stock price volatility. We believe delays led investors to question ESP’s value proposition & terms of existing contracts, a fear exacerbated by recent apparent contract economics erosion at SEAC. Today’s deployment confirms ESP software is commercially viable; a meaningful overhang has now been lifted. A live deployment could also conceivably advance ESP’s contract discussions with new customers.”

In a research update to clients today, Thadani upgraded Espial from “Speculative Buy” to “Buy” and maintained his one-year target price of $4.25 on the stock, implying a return of 78 per cent at the time of publication.

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