The shares of Mitel Networks Corp(NASDAQ: MITL) stock rallied over 11% on December 14th, 2017 (as of 11:33AM EST; Source: Google finance) as Craig-Hallum initiated the coverage of the stock with a Buy rating and a $14 price target. The stock is currently trading at $8.2. MITL stock delivered over 20% in this year to date.
George Sutton believes that the group “has a $25 billion hunting license as its installed base of 70 million user’s hits technology refresh cycles.
The group’s focus to the cloud is ongoing while they are monetizing their installed base by taking their current customers initially cloud capable, and second, by layer on top vertical end user applications. The group is also consolidating in their core market while delivering a positive ROI in line with their targeted returns.
For the third quarter of 2017, the group reported a recurring cloud revenues rise of 24% on an as-reported basis, driven by expanded installation capacity. Their recurring cloud bookings remained solid during the third quarter which rose 30% year-over-year leading the total recurring booking to a new record level. This solid performance was driven by several wins of seven figure deals in Asia, Europe and North America. The larger enterprise customer wins ranged in size from 2,000 seats to upward of 12,000 seats.
Mitel Networks also enhanced their overall gross margin for the third quarter to 55.1%, which is an increase of 190 basis points on a year-over-year basis. The group’s Product gross margins rose 70 basis points to 57.4%, driven by product cost reductions, as well as the impact of acquisitions and favorable foreign currency movements. The group’s Service gross margins surged 630 basis points to 52.6%, driven by initiatives to improve the utilization and efficiency of their services organization and a better revenue mix from their higher margin software maintenance revenues.
Mitel finished the acquisition of ShoreTel. The group believes that this acquisition would speeden their conversion of UCaaS bookings and revenue.