After meeting investors with management this week, National Bank Financial analyst Richard Tse says Kinaxis (Kinaxis Stock Quote, Chart: TSX:KXS) remains one of his favorite names.
In a research update to clients today, Tse maintained his “Outperform” rating and one-year price target of $100.00 on Kinaxis, implying a return of 48 per cent at the time of publication.
The analyst says nothing has really changed of late except for Kinaxis’s share price, which has been caught in the broader tech malaise.
“We had the opportunity to meet investors with management yesterday,” Tse notes. “If you’ve been following our research on KXS, you won’t be surprised that we went into the meetings with high expectations. Fortunately, what we heard continued to reinforce those expectations regardless of the recent quarterly hiccup which we continue to believe opens another buying opportunity not unlike what we’ve seen with previous hiccups in this name – that’s because we don’t believe anything has changed with our underlying fundamental investment thesis.”
Tse, addressing the potential concern that things might be slowing for KXS says the answer is decidedly “no”.
“No doubt the most important question and answer for you the investor is whether the recent quarterly shortfall care of delayed deals signals a break in growth for what has been one of Canada’s most successful tech IPOs in recent years. If you read our post-quarter note, you’ll be familiar with our view that we don’t think there is a break in our thesis based on our diligence at and beyond the Company’s recent user conference. In our view, we continue to see a growing pipeline of bigger deals across a wider range of geographies and verticals. If anything, our diligence
suggests Kinaxis may have been spread thin from an operating perspective given the number of prospects. More importantly, we believe recent changes from the expansion of data centres to operational / organization measures across sales, marketing and product development should put Kinaxis in a position to continue scaling.”
Tse thinks Kinaxis will generate EBITDA of (all figures USD) $42.9-million on revenue of $153.1-million in fiscal 2018. He expects those numbers will improve to EBITDA of $52.4-million on a topline of $184.2-million the following year.
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