Roth Capital Says Short Report On Mitek 'Creates Buying Opportunity'

On Thursday morning, TheStreetSweeper published a report providing seven reasons why Mitek Systems, Inc. MITK, which had almost doubled since the beginning of the year, is on the verge of a nosedive. Among the issues were insider sales, intellectual property, Mobile ID competition and valuation. Following the release, Roth Capital analyst Darren Aftahi reiterated a Buy rating and $9.75 12-month price target on shares of Mitek.

The analysts think TheStreetSweeper’s note fails to consider the significant progress of the company’s Mobile ID, which still only accounts for roughly 25 percent of its sales, but is certainly helping drive an acceleration in topline growth. Thus, the experts believe “the current pullback creates a buying opportunity.”

Related Link: Mitek Systems, Up 98% This Year, Is On The Verge Of A Nosedive: StreetSweeper

Why TheStreetSweeper Is Not Spot-On 

• The insider sales described by the article corresponded to the “exercise of-low priced stock options.” In addition, one of the sales reported was made by the company’s former Chairman, who is no longer with them, while another one of the sales, made by the CEO, “was to cover the cost of taxes pursuant to a 2006 option grant.” It should be noted that the selling parties (the CEO, CFO and GM of Payments) still own about 4 percent of the company’s float.
• The reported litigation against Top Image Systems Ltd. TISA has been dropped due to a lack of relevance and profitability potential. “The short report also highlights that USAA now gets MITK’s check deposit software for free. USAA paid for a one-time license for legacy back office check capture product Quick Strokes. USAA, however, does not have access, nor pays a license for access to MITK’s mobile check capture products.”
• While competition for Mobile ID is unavoidable, channel checks suggested that its main competitor is a company that just filed for bankruptcy and was then acquired by Centana Growth Partners. “Given we believe MITK is getting ~$1 per instance, on average, for its Mobile ID products and has already announced, by our count, eight Fortune 500 FY16 wins in Mobile ID, and across multiple verticals, we believe competitive threats highlighted in the report may be overblown,” Roth’s note concluded.