Xtract One Technologies is a buy, Eight Capital says

Following meetings with management, Eight Capital analyst Adhir Kadve remains bullish on Xtract One Technologies (Xtract One Technologies Stock Quote, Chart, News, Analysts, Financials TSX:XTRA).

In a research update to clients August 28, Kadve maintained his “Buy” rating and price target of $1.30 on XTRA.

The analyst says he came away from recent meetings feeling positive.

“We hosted Xtract One CEO Peter Evans and CFO Karen Hersh for two days of marketing meetings this week and last,” he wrote. “Discussions largely centered on Xtract’s massive market opportunity and how it will tackle this opportunity. The tone of the meetings was positive, with investors highlighting Xtract One’s execution on key goals laid out for F24 (for example receiving the DHS Certification) and the clear value proposition of its solution. We came away from the meetings reaffirming our thesis on the name (see our Initiation report here) and we gained incremental confidence on Xtract’s growth trajectory moving forward. We believe ongoing customer announcements and Q4/F24 results (mid-October) are key upcoming catalysts that investors should look out for.”

Kadve thinks the company will post an Adjusted EBITDA loss of $8.7-million on revenue of $15.9-million in fiscal 2024. He expects those numbers will improve to an EBITDA loss of $3.4-million on revenue of $31.0-million in fiscal 2025.

Our target price is based on applying an 8.0x multiple to our C25E Sales; the company currently trades at 3.7x, versus Physical Security companies, who on average trade at 4.3x C25 Sales, and key competitor Evolv (EVLV), which trades at 4.4x. Our premium valuation is justified, in our view, given the growth the company has achieved, which we believe is sustainable in the future. Key risks to our target include negative headline risk, heightened competition, and innovation risk,” the analyst added.