There’s still upside in Sandvine, says Canaccord Genuity

A better than expected quarter provides more evidence that Sandvine (Sandvine Stock Quote, Chart, News: TSX:SVC) is cheap compared to its peers, says Canaccord Genuity analyst Robert Young.

Yesterday, Sandvine reported its Q1, 2017 results. The company earned (U.S.) $4.1-million on revenue of $33.3-million, a topline that was down 2.6 per cent from the $34.2-million in the revenue the company posted in last year’s first quarter.

“Over all, I’m pleased with the start to the year, with strong revenue contribution from the wireless and fixed telco markets. However, the cable market continues to lag as it experiences the ongoing effects of the consolidation activity that took place last year,” said CEO Dave Caputo.

Young notes that Sandvine’s first quarter bested his and the street’s expectations on the top and bottom line.

“While revenue for the quarter was down YoY and is likely to be down YoY for Q2, Sandvine framed its deal pipeline as healthy and supportive of growth in 2017,” he says. “Moreover, the quarter beat was based on singles and doubles rather than large deals, underscoring the benefit from recent customer wins and a wider customer base. The key headwind is still weakness in the cable end-market, which was offset in Q1 by strength in fixed and wireless in Q1. The APAC and EMEA regions were up 77% and 32% YoY, respectively, on this strength. On balance, we remain positive on Sandvine shares supported by new customer additions, robust balance sheet with cash representing ~39% of the current share price, an active NCIB, and a sustainable 2.6% dividend yield.”

In a research update to clients today, Young maintained his “Buy” rating and raised his one-year price target on Sandvine from $3.25 to $3.50.

Young thinks Sandvine will post EBITDA of (U.S.) $24.3-million on revenue of $128.1-million in fiscal 2017. He expects these numbers will improve to EBITDA of $27.2-million on a topline of $133.9-million the following year.