Shares of Absolute Software Corp. (ABST-T; ABST-Q) are on the rise for a second straight day and hit an all-time high on Thursday after the Vancouver-based cybersecurity company reported higher-than-expected earnings and raised its outlook. Some analysts increased their target prices following the company’s positive financial news.
Absolute rose by as much as 34 per cent in early Thursday trading to $25 on the Toronto Stock Exchange before settling back to around $20.75, up 11.5 per cent midday. The stock surpassed its all-time high of $19.91 from Nov. 2007, which includes a 2:1 stock split that took place in early 2008.
On the Nasdaq, the stock rose 45 per cent in early trading Thursday to US$21.20 before retreating to around US$16.40 midday, up 12 per cent. The stock rose 6 per cent on both exchanges on Wednesday, after reporting its second-quarter results after markets closed on Tuesday.
Absolute reported revenue of US$29.9-million for its second quarter ended Dec. 31, 2020, up 16 per cent from a year earlier, driven mostly by growth in its education segment. Analysts were expecting revenue of US$28.9-million for the quarter.
Absolute provides cloud-based management and security software to industries ranging from education and government to healthcare and financial services.
Its second-quarter net income came in at US$1.9-million or 4 US cents per share, compared to US$2.7 million or 6 US cents a year earlier. Analysts were expecting earnings of 3 US cents per share.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was US$8-million, ahead of consensus of US$6.7-million and up from US$6-million a year earlier.
The company also raised its full-year revenue outlook to US$117-million to US$119-million from US$116-million to US$118-million, or annual growth of 12-to-14 per cent.
Canaccord Genuity analyst Michael Walkley has a “buy” on the stock and increased his target to US$20 from US$16 following the earnings report.
“We believe Absolute Software has unique technology advantages, a large and growing TAM [technology acceptance model], and a strong SaaS [software-as-a-service] business model,” he wrote in a Feb. 9 note, adding the company’s “key technology differentiator is its undeletable endpoint defenses with its patented persistence technology embedded... "
He also said the endpoint security market “is expanding rapidly, and Absolute’s endpoint resilience solution is emerging as a critical capability in a time when the industry is redefining the modern endpoint computing architecture.”
Raymond James analyst Adam Tindle increased his target to US$17 from US$14 and reiterated this “outperform” (similar to buy) rating on the stock.
“Our core thesis remains intact,” he wrote in a Feb. 10 note, including “a durable growth opportunity” as well as an “attractive business model” and option to scale a new as-a-service platform, which he believes isn’t priced into the stock at current levels.
BMO Nesbitt Burns analyst Thanos Moschopoulos has a “market perform” (similar to hold) and increased his target price to $21 (Canadian) from $18 after the second-quarter earnings report.
While results were ahead of consensus on both revenue and EBITDA, driven by strong performance in its education division, “we’d like better comfort that education can remain a growth market, longer-term,” Mr. Moschopoulos wrote in a Feb. 9 note.
However, he still sees the stock as inexpensive and believes management “has been executing well.”
Absolute shares are up by about 50 per cent over the past three months and have doubled over the past year.
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