Pacific Trader: Can Absolute Software capture the exploding market for work-from-anywhere IT security?

Absolute Software just made a monster acquisition of Seattle-based NetMotion.

Credit: Absolute Software

Absolute Software president and CEO Christy Wyatt

The company just made a monster acquisition of Seattle-based Netmotion Software

The stock: In a province burgeoning with ambitious (some might say overhyped and overpriced) technology startups, Absolute Software Corp. (TSX, NASDAQ:ABST) is a hoary relic of an earlier time. It was founded in 1993, focused on tracking systems for the then-novelty of laptop computers. But under the leadership of president and CEO Christy Wyatt over the past three years and especially in the past one, when working from home became the norm, the Vancouver company has honed its mission around what it calls “endpoint resilience”—IT security for company workforces wherever they are, using whatever device.

The drivers: On that front, Absolute took a big step this past quarter, acquiring NetMotion Software of Seattle for US$340 million, nearly half its own market capitalization. The addition gives Absolute a complementary virtual private network (VPN) platform and entry into the fast-growing “zero trust” secure network access market, along with NetMotion’s customer base and profit stream. Absolute is financing the deal with US$65 million of its own cash and a US$275-million term loan from Benefit Street Partners.

In a sign of confidence this May, Absolute started paying a quarterly dividend that amounts to 26 cents US annually for a 1.8-percent yield. Short interest fell and volume increased in June, suggesting the stock price may be about to make an upward move. The company is projecting revenue of US$120 million this year, an almost 15-percent increase on 2020 (without factoring in NetMotion’s contribution).

Word on the street: Of the seven analysts covering Absolute, five have a buy rating and two, hold. The consensus target is US$20 per share, a 38-percent premium on Tuesday’s close of US$14.45 ($17.95).

Coming and going: Richmond-founded Great Canadian Gaming Corp.‘s (TSX:GC) takeover by Apollo Global Management (NYSE:APO) was, according to announcements by both parties, due to close in the second quarter of 2021. But with one day to go, the company is still trading on the Toronto Stock Exchange. Casino gaming has been one of the sectors worst hit by COVID-19. Of Great Canadian’s 26 properties, only Casino Nova Scotia in Halifax and Sydney and Casino New Brunswick in Moncton are running, though the B.C. government has signalled that casinos will be permitted to reopen in the province as of July 1.