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Absolute Software gets downgraded at Paradigm Capital

Absolute Software
Absolute Software
Outgoing Absolute Software CEO Geoff Haydon.

A strong recent run in shares of Absolute Software (Absolute Software Stock Quote, Chart, News: TSX:ABT) has Paradigm Capital analyst Kevin Krishnaratne thinking the stock is fully valued.

In a research update to clients today, Krishnaratne lowered his rating on Absolute from “Buy” to “Hold”. The analyst also cut his one-year price target on the stock from $9.00 to $8.50, implying a return of 10 per cent, including dividend, at the time of publication.

Krishnaratne today explained the reasoning behind his more bearish take on the Vancouver-based security software provider.

“ABT reports Q3/FY17 results tonight after market, and we expect management to deliver on its promise of an increasing pace of revenue growth and double-digit billings gains,” he said. “However, we also reflect on investments necessary to achieve these top-line trends. We have taken a more conservative approach to FY18 spending assumptions, which result in a lowering of our forecast. While we agree with management’s plan to capitalize on emerging information security trends, we believe investors should wait for Q4/FY17 results and the introduction of FY18 guidance in late August before becoming more constructive on the name.”

Krishnaratne thinks Absolute Software will post EBITDA of $6.6-million on revenue of $93.4-million in fiscal 2017. He expects these numbers will improve to EBITDA of $10.0-million on a topline of $101.9-million the following year.

“While our forecast is conservative versus management’s longer-term vision of achieving a revenue growth and EBITDA margin mix of 20%/20%, we note that new product launched (Persistence Services, EDD) have the ability to provide further upside to our revenue estimates with only incremental opex,” adds the analyst.

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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