It’s been a tough road for tech stocks and, in particular, smallcap tech. The Globe and Mail recently reported that many such stocks are down 50 or even 75 per cent, making them ripe candidates for a takeover.
While that is one option, there are others that could bounce back strictly because they may be vastly oversold.
That could be the case with these three stocks, which have something in common: analysts in the past few days have sung their praises.
NANO ONE MATERIALS (TSX:NANO)
Roth Capital analyst Craig Irwin likes what he sees from Vancouver-based Nano One Materials Corp. (Nano One Materials Corp.Stock Quote, Chart, News, Analysts, Financials TSX:NANO).
In a research report to clients March 13, Irwin initiated coverage of NANO with a “Buy” rating and a one-year price target of $7.00, a figure that implied a return of 100 per cent at the time of publication.
And although the analyst cautions that NANO is still in the pre-revenue stage, he says he believes the company could generate (C) $50 million in untaxed income in 2027.
“Applying a 30x multiple in this earnings scenario for unique technology and an impressive growth outlook, and discounting back at 20% for four years, implies a C$7.00 stock on 105 million shares,” he said.
CALIAN GROUP (TSX:CGY)
Echelon Capital Markets analyst Amr Ezzat says Calian Group (Calian Group Stock Quote, Charts, News, Analysts, Financials TSX:CGY) should benefit in a number of ways from a recent acquisition. The analyst reviewed the proposed deal in a client update recently in which he maintained a “Buy” rating on Calian while raising his target price from $85 to $90 per share, implying at the time of publication a one-year return of 47.0 per cent.
Calian, which has business and technology services in the areas of Health, IT, Learning and Advanced Technologies, is well-positioned going forward, says Ezzat.
“Calian is a quality diversified operation with a resilient balance sheet, strong cash flow generation capabilities, and a solid track record of value creation through both M&A and innovation,” he wrote. “Each of Calian’s segments stands to benefit from secular growth trends. Calian has a long history of execution, having nearly doubled revenues and EBITDA in the past three years, with CGY’s share price closely following suit,” he added.
Overall, Ezzat said Calian continues to have a “fortress-like” balance sheet, high-visibility revenues and a record-high share price, all of which put the company in the pole position to take advantage of shrinking market target multiples through M&A.
ACUITYADS (TSX:AT)
Shares of Canadian ad tech company AcuityAds (AcuityAds Stock Quote, Charts, News, Analysts, Financials TSX:AT) have been languishing for months now, but Echelon Capital Markets analyst Rob Goff sees life in the stock up ahead.
AcuityAds, which provides real-time bidding solutions for digital advertising, announced its fourth quarter and full year 2022 financials on Thursday. Q4 revenue was up 8.7 year-over-year and up 38.2 per cent sequentially to a record $40.0 million. Gross margin was 48.4 per cent and adjusted EBITDA was $2.4 million compared to $5.9 million a year earlier.
Goff noted that AcuityAds finished the quarter with $85.9 million in cash and having repurchased about 4.7 million shares through its NCIB for $14.5 million. He said he expects the company to remain active in share buybacks, which management intends to fund through free cash flow from operations.
On the acquisition front, Goff said small or mid-sized tech acquisitions are likely in the cards where scale is a lower priority given the traction being generated by illumin.
“We believe the current enterprise value of $53.8 million heavily discounts the revenue profile for illumin where revenues have advanced from $26.0 million in 2021 to $53.8 million in 2022 exceeding our forecast at ~$50 million for the year,” he said.
With the update, Goff reiterated a “Speculative Buy” rating and $4.50 target on AT, implying at the time of publication a one-year return of 100 per cent.