Avante Logixx is still a buy, Beacon Securities says

Following the release of the company’s third quarter financials, Beacon Securities analyst Gabriel Leung has lowered his one-year price target on Avante Logixx (Avante Logixx Stock Quote, Chart TSXV:XX), though the analyst has maintained his “Buy” rating on the stock.

On Tuesday, Avante Logixx reported its Q3, 2018 results. The company lost $1.02-million on revenue of $8.85-million, a topline that was up 47 per cent over the same period last year.

“I am pleased with the results for the quarter as we have continued to execute on our strategy of building a platform critical to supporting a business with significantly greater scale which we intend to realize through M&A in the near term,” CEO Craig Campbell said. “Our core businesses have delivered against our expectations and, prior to investments at the corporate level, generated positive adjusted EBITDA. We continue to execute against our strategic plan of capturing market share through focused organic growth and strategic M&A which has resulted in significant top-line growth.”

Leung notes that XX beat his $7.9-million expectation on the topline, but that EBITDA of negative $345,000 missed the postive $160,000 mark he had targeted. The analyst thinks the rise in op-ex will soon abate and pave the way for more growth.

“While operating expenses have increased notably over the past few quarters, we believe they reflect the company’s desire to lay the proper infrastructure, personnel and capacity for this business to scale materially higher,” Leung says. “Over the next few quarters, we do not anticipate any meaningful increase in corporate costs as the company looks to capitalize on its pipeline of opportunities. We believe Avante remains in good position to accelerate organic growth via larger contracts over the near-term, augmented with M&A activity.”

In a research update to clients today, Leung maintained his “Buy” rating on Avante Logixx, but lowered his one-year price target from $4.00 to $3.50, implying a return of 94 per cent at the time of publication.

Leung thinks XX will post EBITDA of zero on revenue of $30.8-million in fiscal 2019. He expects those numbers will improve to EBITDA of $1.8-million on a topline of $45.7-million the following year.

The analyst says his new target price is based on is based on 1.5x FY21e EV/Sales.