We remain neutral on Espial Group, PI Financial says

A new development at Espial Group (Espial Group Stock Quote, Chart: TSX:ESP) isn’t moving the dial for PI Financial analyst David Kwan.

On Wednesday morning, Espial announced that Colorado-based WideOpenWest Inc. (WOW!), the sixth largest cable provider in the United States, will use Espial’s Elevate video platform to power its WOW! Ultra set-top box offering.

“We are excited that WOW! has chosen Elevate to continue their investment in improving their customers’ experience,” said Matt James, Espial’s VP North America Sales. “We are working to ensure that service providers of all sizes benefit from the scale and speed of innovation that are fundamental to the Elevate TVaaS platform. The video industry is highly competitive, and Elevate allows service providers like WOW! to give their customers the features and functionality they have come to expect, while getting to market quickly and with limited risk.”

Kwan says although he does see this as a positive for Espial, he notes that the company remains in a competitive business.

“WOW has signed up for ESP’s Elevate SaaS platform, which will power its ULTRA set top box offering,” the analyst explains. “WOW is an existing Elevate customer, one of many that have converted to Elevate SaaS, as Management has done a good job to date of converting existing customers (although the pace of conversions has slowed as of late from an initial flurry last fall). However, ESP has struggled to sign new customers to Elevate SaaS, as we believe the market remains very competitive.”

In a research update to clients today, Kwan maintained his “Neutral” rating and one-year price target of $1.55 on Espial Group, implying a return of 25 per cent at the time of publication.

Kwan thinks Espial will generate Adjusted EBITDA of negative $1.8-million on revenue of $27.7-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $700,000 on a topline of $31.0-million.