Beacon reiterates a buy, target $1.35Overall, we believe the Q4 results highlighted the strong operating leverage in NeuLion’s business model, along with the strong organic growth inherent in its core business. We are also happy to see the stabilization in DivX (thanks to recent new license signings), which compares to declines in previous years prior to NeuLion acquiring the business.
With a strong pipeline of opportunity of potential rights holders, continued growth in video streaming usage, along with key events like the 2016 Summer Olympics, which should further boost usage, we believe the company remains well positioned for another strong year and also well positioned to recapture the expected drop in revenues associated with the NHL contract in 2017.
With the stock trading at only 5.5x 2016 EV/EBITDA (and 2017, which excludes contributions from the NHL outside of the consulting arrangement), we view the stock as representing a compelling risk-return trade. We reiterate our Buy rating and C$1.35 target, which is based on 10.5x FY17e EV/EBITD