Tech stocks are on sale! For investors, that’s the flip-side of current, dismal valuations for many (most?) small-cap tech companies.
This means that small-cap tech winners who create or build upon some lucrative niche in the tech space today offer investors arguably more upside than at virtually any other time. So where should investors be shopping for a hot tech opportunity?
According to Maxim Group’s Equity Research unit, one strong candidate to consider is Universal mCloud Corp. (TSX: V.MCLD, OTCQB: MCLDF, Forum). In a January 3, 2019 report, Maxim Group has initiated coverage of MCLD. Analysts Nehal Chokshi and Jack Vander Aarde focused on three investment drivers:
- Well-positioned in multi-billion dollar “asset management software markets for smart buildings”
- Strategic targeting of small- to mid-sized opportunities and channel partnerships, supported with strong management
- Long term EBITDA of 30%, in line with other SaaS corporations
Investors new to Universal mCloud may be scratching their heads with respect to the Company’s niche: asset management markets for smart buildings. However, many Stockhouse tech investors are already familiar with MCLD – from several previous Stockhouse feature articles.
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Readers starting their due diligence on Universal mCloud may want to begin with an introduction to this Company, via a full-length feature article from January 10, 2018 that spelled out the thinking behind mCloud’s AssetCare™. Part of the beauty of the MCLD business model is that while the Company has developed a single IoT tech platform, it has already been applied in various categories of asset-care management, including:
- HVAC optimization
- Wind turbine diagnostics
- Electrical transformer diagnostics
- Defense assets
This SaaS solution offers several superior qualities (including a heavy AI component that learns over time) that has allowed Universal mCloud to accumulate a robust list of Fortune 500 clients. Diverse corporations such as Lockheed Martin, McDonald’s, Bank of America, and Southern California Edison are all coming to MCLD for AssetCare™.
Maxim Group’s Equity Research estimates the current market for MCLD’s IoT/SaaS platform at CAD$2.2 billion today, rising to CAD$4.1 billion over the next 10 years, representing a very solid CAGR of ~7%.
Why does Maxim Group see the Company as being strongly positioned in this space? It’s because they see the AssetCare™ platform covering “multiple verticals”, including logistics and fleet management (~22%), production monitoring (~18%), building automation (~18%), smart retail (~14%), utilities and smart grids (~10%), remote healthcare and wellness (~10%), and other (8%).
With only the HVAC optimization market, Maxim Group estimates that approximately 66% of existing rooftop HVAC systems have some degree of remote management capability. Based on this estimate, it sees this market expanding by 50% as penetration of these smart-building systems rises to 100%.
The analysts have also given Universal mCloud a thumbs-up for its strategic approach to maximizing market share and margins. They view MCLD as being ideally positioned to capture market share with small- to mid-sized opportunities and/or branch offices of large organizations – with Starbucks and Bank of America cited as prominent examples.
Here, Maxim Group sees the leadership of CEO Russ McMeekin to be a strong competitive advantage for the Company. With decades of management experience in IoT and software businesses (including Honeywell’s smart building business), Maxim Group cites this as a key to inking “notable” contracts, including Universal mCloud’s recent distribution deal with Telus.
Combining these factors, the two analysts see strong growth potential from MCLD’s current $0.30 share price. This is based upon the expectation of solid growth in the Company’s recurring monthly revenues and anchored by an estimate of long-term EBITDA at 30%.
Last year was a tough year for tech companies, tech stocks, and the investors in these companies. As we move into 2019, investors have the opportunity to prosper with companies that are not only able to generate strong organic growth but are already significantly undervalued due to the current trough in this sector.
For investors who are attracted to hi-tech companies with excellent management and an illustrious list of Fortune 500 clients, Universal mCloud may be the Company you’re looking for.
www.mcloudcorp.com
FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.