Pivot Technology is a double from here, says Echelon

Following the announcement of winning what he describes as a “prestigious” award, Echelon Wealth Partners analyst Gianluca Tucci has raised his price target on Pivot Technology Solutions (Pivot Technology Solutions Stock Quote, Chart TSX:PTG)

On February 26, Pivot announced that its Smart Edge had won the Frost & Sullivan Technology Innovation Award for its advanced development platform for multi-access edge computing.

“We’re honored to be acknowledged by Frost & Sullivan for accelerating the network’s transformation at the edge,” said Smart Edge CEO Bob Pike. “Enterprises are seeking innovative ways to create new revenue streams and differentiate themselves from their competitors. At Smart Edge, we are dedicated to providing enterprise customers with a new way of processing data that reduces latency to enable real-time insights and responses.”

Tucci thinks Smart Edge should be its own company, but says the whole of Pivot is undervalued.

“We continue to believe Smart Edge would best be valued as a standalone spinout once revenue generation occurs and expect more operational updates in due course,” the analyst says. “We believe much of the core legacy/integration issues have been address in 2018 and the Company is in a much better position now to focus on shareholder value creation. We reiterate the above developments are the largest validator and confirmation of value additive technology for Smart Edge that we have learned to date. With the aforementioned noted, we continue to believe PTG shares are undervalued at these levels and evidenced by its recently declared dividend (16+% yield at time of declaration) which is to be paid out on Friday, March 1. Our PT leaves room for upside on our $17M baseline 2019 EBITDA forecast and Smart-Edge commercialization and ultimate monetization. We look for full Q418 financials by mid-March and expect additional operational commentary at that time.”

In a research update to clients today, Tucci maintained his “Buy” rating but raised his one-year price target on PTG from $2.40 to $2.50 because he says the Smart Edge event is a de-risking development. The analyst’s new target implied a return of 105 per cent at the time of publication.

Tucci thinks Pivot will post Adjusted EBITDA of $16-million on revenue of $1.38-billion in fiscal 2018. He expects those numbers will change to EBITDA of $17-million on a topline of $1.32-billion the following year.