Their analyst really goes out on a limb, raising his price target to $4.00 when it was already $3.84. GLTA
Fiscal Q1 Results Are In Line With Our Expectations
What's Changed
Sandvine reported in-line fiscal Q1 revenue and earnings after
taking into account a one-time gain on the sale of a private company
(added ~$0.02/share to IFRS EPS) and accounting for a normalized
tax rate (also added ~$0.02/share) that we exclude from adjusted
EPS. A ramp-up in sales and marketing costs is still expected this
year.
Fiscal Q1 revenue was $32.4M (us $31.4M, cons. $32.5M), gross
margin was 76.1% (us 74.5%, cons. 73.5%) and adj. EPS of $0.03
(us $0.03, cons. $0.04).
Implications
Our investment thesis for 2015 still assumes rising OpEx will limit
positive operating leverage. It is for that reason we reiterate that
shares are fairly valued, reflecting our EPS estimate of $0.15 for
2015 (Street $0.17).
Sandvine is benefiting from sector trends of service creation and
market leadership. Its issue is that incremental investments limit
EPS leverage. At the moment, it is unclear when the EPS leverage
from these new investments will begin to contribute.
Our FQ2 sales forecast is generally unchanged. The book-to-bill was
said to be under 1. Our revenue forecast is now $35.2M (from
$34.5M, cons. $34.1M) while EPS is unchanged at $0.03 (cons. of
$0.04).
For F2015, we expect sales of $144M (prior $147M, cons. $144) and
EPS of $0.15. For 2016, we expect revenue of $156M (prior $169M,
cons. $170M) and EPS of $0.18 (prior $0.20, cons. $0.22).
Valuation
Our PT is now C$4 (from C$3.50) and is based on 15x our 2015 EPS
estimate of US$0.15 plus cash/share of US$1.01, and now assumes
a 1.25 CAD/USD. SVC trades in line with peers at 14x 2015E EPS
ex-cash. On a 2016E P/E basis, SVC trades at 17x versus peers at
14x. Investors should wait for a more attractive entry point.