Its stock has been on a tear since a better than expected third quarter last November, but after attending a key trade show, Haywood analyst Pardeep Sangha says he continues to believe Avigilon (TSX:AVO) is undervalued.
Sangha attended the ISC West 2017 Conference in Last Vegas and came away feeling bullish about Avigilon’s prospects and the prospects for the space in general.
“In our opinion Avigilon is amongst the leaders in this market along with companies such as Axis Communications, Milestone (private), Hikvision and Dahua,” says the analyst. “These companies have numerous product offering, are innovating new features into their products and are making a push into video analytics and artificial intelligence technologies. Video analytics is becoming more prevalent throughout the industry, while Artificial intelligence solutions are still in their infancy.”
Sangha says fears that Avigilon will not be able to command premium pricing in the near future are unfounded.
“We do not believe this industry will become commoditized anytime soon,” he says. “There continues to be innovation and differentiation in the video surveillance market with new product introductions keeping pricing stable at the upper end of the market. Video surveillance is a large global market opportunity and there are still many markets around the world where the ratio of cameras to people remains very low.”
In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $25.00 on Avigilon, implying a return of 59.5 per cent at the time of publication.
Sangha believes Avigilon will generate Adjusted EBITDA of $70.9-million on revenue of $420.6-million in fiscal 2017. He expects these numbers will improve to EBITDA of $90.8-million on a topline of $480.9-million the following year.