Canaccord Sees 125% Upside For Synacor Shares

Incremental Revenue Opportunity From AT&T Deal

Analyst Michael Graham believes the AT&T Inc. T deal transforms the revenue outlook, although creating some margin pressure. The analyst expects about $79 million in incremental revenue by 2018 and about $100 million by 2019, growing by about 5 percent in each year through 2021.

For the forecast to be hit, the analyst believes Synacor should perform well on mobile with AT&T.

"While AT&T should contribute to margin compression in 2018–19, we expect gradual recovery to the mid-40 percent range by 2021 as recurring revenues grow in the mix," the analyst said of the margin trajectory.

Growth And Diversification From Newer Businesses

Canaccord expects the newer email and cloud ID businesses to grow in the mid-20 percent, each, on average in the short term and reach about $109 million and $19 million by 2021. The syndicated business would grow in the low- to mid-30 percent range through 2019 and reach $86 million by 2021, the firm added.

The firm noted that these new businesses are fast-growing and have high margins compared to the legacy portal business. Additionally, the firm said, "We believe there are a few opportunities not reflected in our forecast that could lead to a more extended period of growth."

Concluding, Canaccord said it sees Synacor as having dramatic, although concentrated and step-function, growth in the short term followed by good prospects for double-digit growth thereafter. With solid AT&T execution in 2017–2018, the firm expects the valuation multiples to go higher.

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