Sierra Wireless has 39% upside, National Bank Financial says

After a quarter that came in slightly better than his expectations, National Bank Financial analyst Richard Tse remains bullish on Sierra Wireless (TSE:SW, Nasdaq:SWIR).

On Thursday, Sierra Wireless reported its Q3, 2017 results. The company earned (U.S.) $1.2-million on revenue of $173.2-million, a topline that was up 12.8 per cent over the same period last year.

“In the third quarter of 2017, we delivered strong revenue and profitability growth on a year-over-year basis, driven by performance improvements in each of our three business segments,” said CEO Jason Cohenour. “We continue to strengthen our leadership position in the Internet of Things with technology innovations, new product launches, new customer wins and strategic acquisitions.”

Tse says a strengthening outlook from the company, which is now firmly positioned in the centre of the IoT space, is removing the memory of a past in which the company had a sometimes volatile track record due to the sensitivities of its hardware business.

“Bottom line, we continue to believe Sierra is experiencing increasing momentum as evidenced by an expanding pipeline that’s been fueled with increasing use cases for its modules,” the analyst says. “Management continues to indicate that both design win activity and lifetime design win value are building on already strong prior results. We believe the stock is at the initial stages of converting on those booked wins.”

In a research update to clients today, Tse maintaiend his “Outperform” rating and one-year price target of (U.S.) $32.00 on Sierra Wireless, implying a return of 39 per cent at the time of publication.

Tse thinks Sierra Wireless will generate EBITDA of $52.3-million on revenue of $687.4-million in fiscal 2017. He expects those numbers will improve to EBITDA of $58.1-million on a topline of $748.7-million the following year.