from Globe and Mail, inside the market blogLong-term investors should take a look at Sandvine Corp. (SVC-T), said Desjardins Securities analyst Maher Yaghi. For investors who can tolerate short-term volatility but are looking for a long-term growth company with strong cash flows and a solid balance sheet, we believe SVC fits the bill, he said. In our view, SVC is well-positioned to be a key player and grow its business during the next network upgrade cycles in both wireless and wireline. It could also become a prime takeover target for established hardware firms looking for a strong software IP platform. Accordingly, he upgraded the Waterloo, Ont.-based tech company to buy from hold. On Thursday, Sandvine reported a third-quarter 2016 drop in revenue of 4.3 per cent year over year, in line with consensus projections as well as a company warning issued three weeks ago. Mr. Yaghi said that warning caused a sharp drop in share price, which now presents an opportunity for investors. Moreover, we believe SVC has significant revenue growth opportunities given its strong focus on software development, he said. We believe the telecom industrys hardware-focused network topology is becoming more software dependent, with network function virtualization taking centre stage, providing SVC with both better product positioning and access to a bigger end market. In the meantime, the company has a strong cash position with about $1.15 per share in excess cash and a 8-per-cent free cash flow (FCF) yield after deducting excess cash. This should allow SVC to aggressively buy back stock. We forecast repurchases of $24-million (U.S.) in FY17. He added: Revenue growth was negative for the first time in four quarters, and we note that revenue volatility has pressured the share price in the past. We believe the revenue decline this quarter could put pressure on the name in the short term. However, we note SVC signed nine new customers, up from eight new clients signed a year ago in a seasonally low-activity quarter. The customer base remains well-diversified, with no customer or reseller accounting for more than 10% of revenue for the second consecutive quarter. This low level of client concentration has rarely happened in the past despite continuous improvement in recent quarters, and should lead to lower revenue volatility in the future, in our view. Though Mr. Yaghi lowered his revenue projections for both 2016 and 2017, he did raised his full-year 2016 adjusted earnings per share estimate by 1 cent (U.S.) to 12 cents. We see SVCs sustained strong cash generation as very attractive, providing management with the opportunity to pay dividends and maintain a strong buyback program, he said. We also view the product suite as industry leading in a field with solid growth potential. Finally, the recent stock price decline provides a good entry point and leaves little downside in the name, in our view. Mr. Yaghi maintained a target price of $3.50 (Canadian) for the stock. The analyst average is $3.60, according to Bloomberg. Elsewhere, Canaccord Genuity analyst Robert Young said the company looks ripe for a rebound in the fourth quarter, raising his target to $4 from $3.75 with a buy rating (unchanged). While product revenue (down 20 per cent year over year) bore the brunt of Sandvine lumpiness and summer seasonal weakness, service revenue (up 21 per cent year over year) was relatively strong, said Mr. Young. SVC does not quantify the size of its opportunity funnel, but stated they were enthusiastic about its size and quality and noted the presence of large opportunities despite a lack of large customers in the quarter. Investments in sales force, share gains and new products have supported the funnel (60 per cent more opportunities since the beginning of the year) and a surge of new customers (51 year to date versus 38 in 2015). We remain positive on Sandvine shares heading into Q4 due to seasonality and our view that expectations are reasonable. Our confidence is supported by the current product offering, the large number of new customer additions YTD, robust balance sheet with cash representing 41 per cent of the current share price, attractive valuation and a sustainable dividend with 2.3-per-cent yield.