NeuLion’s acquisition of Saffron Digital gets thumbs up at Cantor Fitzgerald Canada

Cantor Fitzgerald Canada analyst Ralph Garcea likes NeuLion’s (NeuLion Stock Quote, Chart, News: TSX:NLN) latest acquisition and continues to think the stock is undervalued.

This morning, NeuLion announced it had acquired London, England-based Saffron Digital, a company that over-the-top digital services.

“Saffron Digital has a blue-chip customer base that includes Carrefour, BT, Deutsche Telecom, ITV, Tribeca Shortlist, Vidity and others,” said Saffron CEO Jason Keane. “We are excited to join NeuLion. As part of NeuLion, we can now offer our customers a compelling OTT platform for all premium digital content with support for all types of business models.”

Garcea says the acquisition of Saffron will remove some of the lumpiness from NeuLion’s quarterly reports.

“NLN traditionally has a quieter Q2 and Q3 in relation to Q1 and Q4 due to a lighter sports schedules,” says the analyst. “We see Q2/16 and Q3/16 not having the seasonal drop it usually does, as the Copa America has kicked off (partnered with Univision Deportes) and the NBA Finals are in full effect (partnered with the NBA). As the 2016 summer Olympics kick off August 5, NLN will be streaming live via CCTV in China. Additionally, the acquisition of Saffron Digital bodes well for removing some seasonality from NLN as Saffron’s main customer base is Hollywood which provides content all year round.”

In a research update to clients today, Garcea maintained his “Buy” rating and one-year price target of $2.15 on NeuLion, implying a return of 100 per cent at the time of publication.

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