Espial Group has limited downside, says PI

With another acquisition closed, PI analyst David Kwan thinks it is time to buy Espial Group (Espial Group Stock Quote, Chart, News: TSX:ESP).

On Friday, Espial announced it had closed the previously announced acquisition IP video solution provider ARRIS’s Whole Home Solution (WHS) platform.

“WHS expands our solution portfolio with a cloud-hosted, video-as-a-service platform that is complementary to and will leverage Espial’s current solutions for next-generation IP video services,” said CEO Jaison Dolvane. “Espial gains a broad base of new customer relationships, and further scales our world-class integration, operations and software development teams. We look forward to collaborating with ARRIS to enhance the Whole Home Solution, strengthen support and expand the customer base going forward.”

Kwan says this could be the beginning of some better news for the company.

“We believe the news flow should be more positive in the near-term, especially as ESP’s Tier 1 operator pipeline continues to mature, with buying decisions potentially being accelerated by NOS’ commercial launch,” says the analyst. “We could see some positive developments around the IBC conference next month.

Kwan says the street may be a bit too bullish on Espial right now, but he nonetheless believes it is undervalued.

“We continue to believe that consensus estimates look aggressive, more so looking into FY17,” he notes. “That said, we believe there is a great buying opportunity over the next six to maybe nine months, as the risk/reward looks attractive. The low valuation and cash position provide good downside support while we expect more positive news flow in the near-term that could drive the stock higher, especially if they announce a new Tier 1 customer win.”

In a research update to clients today, Kwan maintained his “Buy” rating and one-year price target of $2.50 on Espial Group.

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