Buy Universal mCloud for big returns, Echelon Wealth says

A new development at Universal mCloud (Universal mCloud Stock Quote, Chart TSXV:MCLD) has Echelon Wealth Partners analyst Gianluca Tucci remaining bullish on the stock.

On Tuesday, MCLD announced a deal with Britwind to upgrade wind turbines and improve their performance using analytic and artificial intelligence.

“mCloud’s expertise in AI and analytics for wind applications complements Britwind’s strengths in the manufacturing and maintenance of wind turbines,” said Costantino Lanza, mCloud’s chief growth officer. “Our AssetCare for wind solution will connect Britwind turbines to help their customers achieve peak performance.”

Tucci today broke down the deal.

“MCLD and Britwind, a full service company in the small and medium-size wind segment with proven excellence in wind energy production, operations and maintenance, signed a five year memorandum of understanding to upgrade over 1,000 wind turbines and improve performance with AI and analytics,” the analyst explained. “Through the upgrade, called rEsolve, MCLD and Britwind are working together to offer Britwind customers a complete end-to-end upgrade solution on a subscription basis. The solution will include the opportunity to use MCLD’s AI and analytics to enhance the operation of their wind turbines alongside a 5-year warranty. The rEsolve solution enables E-series owners, most based in the UK, to extend the life of the E-series machines and improve turbine performance for the benefit of both owners and the environment. Economics should yield ~$500 per connected asset per month and translates to an annual opportunity of ~$6M or ~$30M over five years. We expect rollout to commence in Q319/Q419 with full deployment completed by 2021. We expect Q418 results by end of April
and look for additional commentary on its conference call.

In a research update to clients today, Tucci maintained his “Speculative Buy” rating and one-year price target of $0.80 on MCLD, implying a return of 111 per cent at the time of publication.

Tucci thinks the company will post Adjusted EBITDA of negative $6.2-million on revenue of $5.8-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $1.2-million on a topline of $19.6-million the following year.

“We continue to forecast strong shareholder returns as mCloud gains traction and scale, over time, as a global IoT connector of assets onto the AssetCare platform. MCLD had a transformational 2018 with four acquisitions announced (nGrain, Agnity, Ascent and CSA) – we expect the remaining two (CSA and Ascent) to close in short order with the company focused on closing CSA next,” the analyst adds.