IA Capital IA Capital Markets analyst Neil Linsdell thinks EnWave Corp. has “come through the worst of the storm” after losing a key contract with Costco Wholesale Corp. and now sits poised to “rebuild quickly to profitability and significant revenue growth over the next few quarters.”
Accordingly, citing a pullback in price since he downgraded its shares following the release of its second-quarter earnings at the end of May, he raised his recommendation for the Vancouver-based advanced technology company to “buy” from “hold.”
“After the FQ2 results, we slashed our target price and downgraded to Hold after it became clear that EnWave’s sales into Costco had effectively ceased,” said Mr. Linsdell. “Now, with a new CEO being appointed at NutraDried, a scaled back operation and more focus on clearer wins and product development, we are satisfied that Moon Cheese sales have essentially bottomed out and will rebuild from this point forward, with a new Protein Blitz Mix product and growing distribution beyond its current 25,000 retail points of sale.”
“We remain confident in the Company achieving its targets of twelve small-scale and five large-scale machine sales this fiscal year as we are expecting another two 100kW unit sales in the next couple of months. Although sales efforts were hampered by the pandemic and travel restrictions, EnWave continued to sell and deliver new units that will also lead to an increase in royalty revenue as more products are commercialized. As we see more repeat orders from existing clients and more traction with U.S. cannabis companies and US Army suppliers, we expect momentum to further build in F2022.”
Ahead of the release of its third-quarter results on Aug. 26, the analyst is projected revenue of $4.8-million, relatively flat quarter-over-quarter, with an EBITDA loss shrinking to $1.3-million “as restructuring and cost savings initiatives start to show benefits.”
He maintained a target for Enwave shares of $1.10. The current average is $1.15.