Espial Group gets price target trimmed at Haywood

After a quarter that fell below expectations, Haywood analyst Pardeep Sangha is feeling slightly less bullish about Espial Group (Espial Group Stock Quote, Chart, News: TSX:ESP).

Yesterday, Espial reported its Q2, 2016 results. The company lost $2.94-million on revenue of $4.5-million.

“In the second quarter, we accomplished significant milestones for our business,” said CEO Jaison Dolvane. “The first being that NOS, Portugal’s primary cable operator, commercially launched a next-generation video service using Espial’s RDK-based G4 Client solution. NOS has delivered a highly competitive advanced TV service, which should build confidence for service providers worldwide looking to adopt Espial and RDK to deliver next-generation pay-TV services. Tele Columbus, a large German cable operator, has also announced that they plan to commercially launch their advanced TV service with Espial at the end of this year. The progress we have made in helping our customers launch new TV services demonstrates Espial’s leadership in this market.”

Sangha says Espial’s second quarter missed his estimates for both EBITDA and revenue. He says the company’s results were negatively impacted by lower than expected professional services revenue because of the transition to NOS from professional services to license revenue and also by delays in customer wins. Despite the underperformance, the analyst says investors should focus on a few catalysts for the remainder of the year.

“Three primary growth drivers for Espial’s business over the remainder of 2016 are: 1. NOS ramping up its subscriber count; 2. Tele Columbus launching by the end of the year; 3. ARRIS acquisition boosts Espial’s revenue and customers,” offers the analyst.

In a research update to clients today, Sangha maintained his “Buy” rating on Espial, but lowered his one-year price target on the stock from $4.00 to $3.75, implying a return of 66.7 per cent at the time of publication.

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