IT infrastructure analytics company Martello Technologies Group (Martello Technologies Group Stock Quote, Chart, News TSXV:MTLO) gets crowned a Top Pick by Rob Goff of Echelon Wealth Partners who thinks the company’s exposure to remote access technology should serve it well in this year’s business environment.
Goff issued an update to clients on Friday where he reaffirmed his “Speculative Buy” rating and $0.45 per share target, which at press time amounted to a projected one-year return of 190 per cent.
Martello’s share price fell like the rest of the market starting in late February, essentially cutting its value in half by mid-March. From there, the stock has traded up slightly and currently is down 71 per cent for the year so far.
Martello’s products monitor and optimize performance of real-time applications on networks, such as iQ which integrates clients’ existing infrastructure, applications, network and cloud onto a centralized data layer. Goff says the company is built to thrive in the COVID-19-influenced terrain.
“The Company’s focus on remote access enablement is clearly benefitting from the current circumstances [where] organizations focus on securing remote access capabilities firms. Each integration on iQ costs between $3.3-16.5K annually with high margin contributions for the Company. Martello had earlier released that it has seen an increase in customer inquiries related to remote work. International moves to limit employee travel and the moves to remote work have led target customers to assign greater attention
to ensuring remote access capabilities,” Goff wrote.
Goff is forecasting Martello to reach a positive free cash flow position by the end of 2021 but with $4.6 million it raised in September of last year, management has the funds on hand to go ahead with strategic acquisitions. The company has completed two acquisitions since 2017.
“We believe the pressing areas where MTLO is looking to acquire to complement and continue building out its technology stack lie in artificial intelligence (AI) operations, IT security and network operations,” Goff wrote.
One area of focus is Martello’s non-exclusive agreement with Mitel, signed in 2016 and updated last year, which sees Martello as Mitel’s only unified communications performance analytics software provider. Goff has estimated that currently MTLO is less than 20 per cent penetrated across Mitel’s customer base, leaving it ample room for growth along this vector.
With the update, Goff said a raise in his price target could come with successful execution on MTLO’s part, with accretive acquisitions and with a return to stronger capital markets.
“Martello continues to develop integrated solutions and is now demonstrating its integrated solution to potential customers – we expect adoption to accelerate from this initiative with the first trials of Martello's integrated solutions expected to be completed and in the market within the next six months,” Goff said.
The analyst thinks MTLO will generate fiscal 2020 (year end March 31) revenue and adjusted EBITDA of $13.2 million and negative $3.1 million and fiscal 2021 revenue and adjusted EBITDA of $15.8 million and negative $0.9 million.