Absolute Software is a good buy right now, PI says

Looking for a defensive play in the tech sector? PI Financial analyst David Kwan recommends Absolute Software (Absolute Software Stock Quote, Chart TSX:ABT), who says that the stock’s recent weakness offers a buying opportunity.

In an update to clients on Wednesday, Kwan reiterated his “Buy” rating and C$12.00 target.

Yesterday, endpoint security and data risk management company Absolute announced the appointment of three executives, Sandra Toms as Chief Marketing Officer, Karen Reynolds as Chief Communications Officer and John Robinson as Chief Human Resources Officer. Kwan says all three come with good pedigrees and in particular notes that the hiring of Ms. Toms should hopefully improve the company’s visibility in the marketplace, as he sees brand awareness to be a major obstacle for the company.

“We believe these additions to the senior management team help backfill openings created by the departure of certain people over the last three to six months. Accordingly, we do not expect to see a material increase in expenses due to these hires,” Kwan writes.

Kwan is rating the impact of the event as neutral.

ABT has been on a slide as of late, having dropped more than eight per cent since the start of May. Kwan considers the dip a good time to buy.

“We believe the recent weakness in the stock has created a good buying opportunity. For those that are looking for more defensive names in these jittery markets, we believe ABT is a good investment given its large recurring revenue base (almost all of its revenue is recurring, mostly under multi-year contracts; ~100 per cent renewal rates), strong margins, healthy balance sheet ($35 million in cash and no debt), significant discount valuation and an attractive dividend yield (4 per cent),” he writes.

Kwan is projecting fiscal 2019 revenue and adjusted EBITDA of $98.4 million and $19.0 million, respectively. (All figures in US dollars unless noted otherwise.) His C$12.00 target represented a projected 12-month return of 48.9 per cent at the time of publication.