Absolute Software has 42% upside, Industrial Alliance says

Heading into the company’s fourth quarter results, Industrial Alliance Securities analyst Blair Abernethy thinks better things are on the horizon for Absolute Software (TSX:ABT).

In mid-August, Absolute will report its Q4 2018 results. The analyst expects the company will generate EBITDA of $2.6-million on revenue of $24.1-million, a little more bullish than the street consensus of EBITDA of $2.5-million on a $23.9-million topline. He says changes the company made recently should soon begin to pay off.

“Last quarter, management noted that it continues to experience favourable customer and industry analyst response to the revamped Absolute 7 product platform, which became available late last summer,” Abernethy says. “The Company continues to add new features this year. Over the next few quarters we expect to start to see an improved take-up (i.e., higher ASP) in the Education and Enterprise verticals. We continue to believe the new product enhancements will help raise the Company’s profile in the security marketplace and, in time, the contract sales growth rate.”

In a research update to clients today, Abernethy maintained his “Buy” rating and one-year price target of $10.25 on Absolute Software, implying a return of 42.3 per cent at the time of publication, including dividend.

Aernethy think Absolute will generate EBITDA of $8.5-million on revenue of $93.7-million in fiscal 2018. He expects those numbers will improve to EBITDA of $11.1-million on a topline of $102.3-million the following year.

“Given the significant product enhancements and the refocused sales force, we expect an improving sequential sales trajectory through F2019,” the analyst adds.