D-Box Technologies has an upside of 121 per cent, Echelon says

After the company’s fourth quarter and year-end results, analyst Rob Goff with Echelon Wealth Partners is staying bullish on D-Box Technologies (D-Box Technologies News Stock Quote, Chart TSX:DBO), saying that even as he is trimming his forecast, his long-term thesis on DBO remains intact.

Longueuil, Quebec-based D-Box released its fiscal fourth quarter 2019 and year end on June 26, coming in with Q4 revenue and EBITDA of $8.3 million and $0.267 million, down 11 per cent and 70.5 per cent, respectively, year-over-year. Goff was expecting $9.7 million and $0.210 million for the quarter.

In an update to clients Tuesday, the analyst noted that D-Box’s Entertainment segment was down 25 per cent year-over-year in Q4, with the segment down 11.1 per cent for the whole of 2019, while the company’s Simulation and Training revenue was up 59 per cent year-over-year in Q4.

Goff says the slowdown in the Entertainment section is due to slower growth in new screen additions, which will continue to slow down D-Box’s growth in upcoming quarters.

“To remain on the cautionary side, we continue to await greater traction in North America where we track its penetration of chains, theatre screens and the size of in theatre deployments,” writes Goff. “We remain hopeful about the mid/long term prospect of the Company’s ability to partner and leverage its technology for VR related experiences and increased penetration into the home entertainment applications. Increasing global recliner adoption in the theatres is also working in favour of the Company. The average contract seats are also higher at 40 for recliner seats compared to 25 for non-recliners. We continue to present baseline forecasts where we consider the potential for significant upside about large contract wins.”

Goff is calling for fiscal 2020 revenue of $36.852 million (previously $38.530 million) and EBITDA of $2.384 million (previously $2.5 million). The analyst is maintaining his “Speculative Buy” rating with the new target price of $0.32 per share (previously $0.35 per share), which represents a projected 12-month return of 121 per cent at the time of publication.

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