Eight Capital analyst Christian Sgro is staying bullish on Martello Technologies Group (Martello Technologies Group Stock Quote, Chart, News, Analysts, Financials TSXV:MTLO), saying in an update to clients on Wednesday that the stock could re-rate higher on topline growth. Ottawa-based Martello is a developer of enterprise Digital Experience Monitoring (DEM) solutions that monitor and provide analytics in areas such as unified communications performance, Microsoft 365 user experience and IT services. The company announced on Wednesday the launch of its channel partner program, which allows managed service providers (MSPs) and value-added resellers (VARs) to support small and medium-sized enterprises through Martello\u2019s DME platform for Microsoft 365 and Microsoft Teams. Martello says there are over a million enterprises using Microsoft 365 globally and, according to Gartner, about half of them will be using a third-party software tool to monitor the Microsoft 365 experience, up from just ten per cent in 2020. \u201cWe\u2019ve built a partner program that will give any Microsoft partner a simple and cost-effective path to revenue from value-added digital experience monitoring and optimization services,\u201d said Mike Danforth, VP global sales and partnerships at Martello, in a press release. \u201cThe small and medium enterprises who rely on these trusted advisors can now achieve the benefits enjoyed by large enterprises using Martello DEM to reduce downtime, improve employee productivity and maximize their return on the Microsoft 365 investment,\u201d Danforth said. With the press release, Martello announced a partnership with managed IT services company LDI, which has 7,000 clients and works in over 30 states as a provider in the supply, sale and service of digital office solutions. Commenting on the news, Sgro judged its impact on MTLO as \u201cslightly positive,\u201d saying it helps clear up the runway ahead for the company and that the partner program creates a cost-effective way for Martello to expand its platform to new end-users via shared economics with motivated partners. \u201cMartello is executing on its plan for F2022, first launching a multi-tenant Microsoft 365 monitoring platform (link) which enabled MSPs to manage smaller-scale clients, and now delivering on the formal program launch. This announcement increases our confidence in Martello\u2019s top-line growth and opens Martello\u2019s addressable market. We believe Martello\u2019s 3.2M Microsoft 365 user guidance for March 2022 is conservative,\u201d Sgro wrote. On the LDI partnership, Sgro estimates its clients consist of about 1.6 million end-users at the mid-point and, assuming less than half are serviceable Microsoft 365 users for the Martello platform and at a pricing of $2 per user per year, this suggests about $1.5 in gross revenue from the partnership. \u201cConsidering shared economics with partners and terms of the agreement, we believe the ultimate ARR opportunity with LDI is $0.5 million - $1.0 million,\u201d Sgro said. \u201cWe expect a stable cadence of MSP and VAR adds through 2021 as the partners join the program. We think guidance is conservative. Even a modest penetration of LDI\u2019s base suggests a meaningful contribution to Martello\u2019s recently communicated 2.17 million Microsoft users, and further supports the company\u2019s goal of achieving 3.2 million end-users by March 2022,\u201d Sgro said. With the update, Sgro has maintained his \u201cBuy\u201d rating and $0.40 target price, which stems from a 6.0x multiple of his 2022 EV\/Revenue estimate and, at the time of publication, represented a projected one-year return of 135.3 per cent. \u201cMartello currently trades at 2.3x C2022E EV\/Revenue, compared to North American SaaS peers broadly above 8.0x,\u201d Sgro wrote. \u201cContinued execution on Microsoft DEM growth will be a catalyst for an upward valuation re-rating.\u201d Martello last reported its financials in mid-February where its fiscal third quarter 2021 (ended December 31, 2020) featured revenue of $4.6 million, up 61 per cent from a year earlier, and an adjusted EBITDA loss of $0.26 million compared to a loss of $0.84 million a year earlier. Monthly recurring revenue hit $1.5 million for the fiscal Q3, up 64 per cent from the same quarter the previous year, excluding its discontinued NPM segment. Operationally, Martello completed the integration of recent acquisition GSX over the fiscal third along with hitting 2.17 million Microsoft users on its platform by the close of the quarter. The company is targeting a 60-per-cent increase in that number by the end of fiscal 2022. \u201cAs Martello completed the integration of GSX, we saw growth in our Microsoft DEM business in the third quarter of fiscal 2021 and we continued to generate high margin recurring revenue,\u201d said John Proctor, President and CEO, in a February 17, 2021, press release. \u201cWith more than two million Microsoft users relying upon Martello DEM in Q3 FY21 to stay productive whether at home or the office, we are making product investments to address the IT challenges of remote work. These investments, as well as those to enhance product scalability, are expected to create valuable competitive differentiators for Martello and access to new indirect sales channels for our DEM solutions,\u201d Proctor said.