Intrinsyc Technologies has a 95 per cent upside, says Echelon Wealth

First quarter results from software company Intrinsyc Technologies (Intrinsyc Technologies Stock Quote, Chart TSX:ITC) arrived as expected, according to Echelon Wealth Partners analyst Gianluca Tucci, but near-term softness is cause for a target price drop. In a Tuesday update to clients, Tucci reiterates his “Speculative Buy” rating while decreasing his one-year target from C$2.75 to C$2.60.

Vancouver-based embedded and wireless solutions company Intrinsyc reported its first quarter ended March 31, 2019, on Tuesday, featuring revenue of $6.1 million, Adjusted EBITDA of $0.2 million and EPS of negative $0.01 per share. (All figures in US dollars except where noted otherwise.)

CEO Tracy Rees said that the quarter was negatively impacted by delays in the launch of two platforms and in client orders due primarily to component shortages and client financing.

“We believe that these issues will be resolved during the second quarter through the introduction of the new development platforms which are expected to add over $2 million in revenue over the next 12 months and the production launch of five new client products that will use the company’s edge computing modules. These developments should lead to revenue growth in the second half of 2019,” said Rees, in a press release.

The Q1 came in much in-line with Tucci’s estimates, which called for $6.1 million in revenue, $0.1 million in Adjusted EBITDA and negative $0.01 per share in EPS. The analyst says the production delays have impacted his estimates, bringing down his fiscal 2019 revenue, Adjusted EBITDA and EPS to $27.0 million, $1.5 million and $0.03 per share, respectively (previously, $28.0 million, $2.3 million and $0.07 per share, respectively).

“We note the Company has an undrawn a C$4.4 million credit facility with a major Canadian chartered bank at prime + 1.11 per cent. We view this as a vote of confidence at a competitive rate from a lender to help fund production and other strategic initiatives in 2019 and beyond,” says Tucci. “The resignation of the VP of Global Sales does come as a surprise and note the Company is working on a replacement, despite its near-term challenges.”

Tucci’s C$2.60 target represented a projected return of 95 per cent at the time of publication.