Shares of Opower were surging on Wednesday trading after the company beat expectations for its third-quarter financial results on Tuesday afternoon. Following the report, Canaccord analysts Richard Davis Jr., David Hynes Jr. and Mark Belcarz reiterated a Buy rating and $14 price target on the shares, arguing that the stock is set up to be a top “bounce back” candidate for 2016.
Drivers Ahead
According to the report, the experts believe the shares could benefit from the following:
- 1. A new product cycle as extra customer-facing modules are rolled out
- 2. “Sales efficiency from the bulge of 2014 sales hires as they get their footing in this long sales cycle to the utilities customer base
- 3. “Buying demand as the heretofore correct ~8 million shares, 40+ days to cover short position proves to have overstayed its welcome.”
The analysts believe the best strategy is to progressively build full positions in recovery stories like Opower’s. The experts assured that, in their experience, almost none of them “deliver a straight-line trajectory back to glory.” So, taking into account this caveat, the analysts have no doubt recommending investors to start building a position in the company.
A Look Forward
Opower’s management guided for fourth-quarter revenues in-line with Canaccord’s estimate, but guidance for EBITDA losses were about $2 million better than the firm’s expectations.
The company did not provide explicit guidance for 2016, but it did confirm that it anticipates growth will accelerate and remain around 20 percent over the longer-term. The firm is modeling ~19 percent growth in 2016 and has boosted its EBITDA loss margins to (2.4) percent, from a previous estimate of (5.2) percent.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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