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WANdisco – OEM partnership with a Dell Technologies business, but what of the valuation?

By Steve Moore | Thursday 9 November 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shares in WANdisco (WAND) are currently further higher this week following an “OEM partnership with Virtustream” announcement - though the rise further above 800p compares with a sub 200p share price at the commencement of 2017…

Virtustream is a Dell Technologies business and the agreement is for WANdisco's ‘Fusion’ replication product. It sees WANdisco CEO David Richards emphasising that it “adds significant market reach and scale to our business as we benefit from Virtustream's global sales reach as a part of the Dell Technologies family of businesses” and “is another strong endorsement of WANdisco's unique technology from one of the world's leading technology players”.

Edison Investment Research considers that such an agreement “raises confidence that other similar deals in the pipeline will also convert, laying a platform for a very significant acceleration in growth”. However, it also admits “the valuation demands significant growth and margins”.

Er, you could say that! For 2017, the researcher is forecasting an adjusted pre-tax loss of $10.6 million on revenue of $17 million – with the loss next year $8.3 million on revenue of still sub $22 million. The current market cap is well above £300 million ($390 million), with year-end net cash of $7.1 million anticipated.

The “potential to significantly exceed” forecasts is emphasised together with “a highly operationally geared model” and “the company looks exceptionally well placed in a market with compelling market fundamentals… the company’s strategic attractiveness should also factor in the valuation consideration”. However, I suggest it significantly current market sentiment bullishness which sees the shares at present levels and, with this famously volatile, that after the ride so far this year here it prudent to lock-in gains.

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