Latest from Canaccordkey points:
- Sierra Wireless announced solid Q2/13 results at the high end of its guidance range for its first quarter as an M2M-only focused company. - Post the AirCard division sale on April 2, Sierra exited Q2/13 with $176.6M in cash, representing roughly $5.70 per share.
- Given Sierra's track record for successfully integrating M2M assets such as Wavecom and Sagemcom, we believe Sierra is well positioned to maintain its leadership position in the burgeoning M2M market through potential acquisitions to bolster its industry-leading M2M portfolio.
- We reiterate our BUY rating and increase our PT to US$16.
- We believe Sierra can successfully use its $177M in cash to enhance its M2M organic growth and drive further leverage, as we believe acquisitions will focus on higher-margin businesses than the current corporate average gross margin. While our estimates exclude potential M2M acquisitions, we believe Sierra Wireless has identified acquisitions that could enhance its M2M solution offering. Due to continued weak trends in Europe, we lower 2013 pro forma EPS estimate from $0.27 to $0.19 and 2014 from $0.88 to $0.70. Valuation: Our $16 price target is based on shares trading at roughly 7x our 2014 EV/EBITDA estimate.