Noting that Espial is down significantly this month, Thadani says the stock’s performance is currently detached from the company’s.
“ESP stock is down ~25% month-to-date, which is disconnected with the company’s recent execution,” says the analyst. “Recall, ESP reported Q2 results on July 29th, which suggested important integration work on track as evidenced by very strong Europe and Professional Services revenue. ESP’s three existing major contracts are expected to start going live from Q4 onwards; a widely anticipated catalyst to re-rate the stock higher. ESP’s recent Orange contract & two Master Services Agreements (MSAs) could lead to new contract wins as these provide important technology validation by paying customers.”
Thadani says the wind is at Espial’s back with regards to trends in the industry. He points out that Pay TV subscriber losses are accelerating in the United States, and that Espial is currently in “deep discussions with more than six global operators, representing more than a million subscribers.
The Mackie Research Capital analyst points out that Espial has a strong balance sheet, with $48-million in cash and no debt, equating to more than $1.30 a share. He notes that the stock trades at 4x 2016 EV/EBITDA, much lower than its main competitor SeaChange, which trades at 11x EV/EBITDA.
In a research update to clients today, Thadani maintained his “Buy” rating and one year target price of $5.25 on Espial, implyng a return of 117% at the time of publication.