Lake Street Capital Markets Starts ShoreTel (SHOR) at Buy

Lake Street Capital Markets initiated coverage on ShoreTel (NASDAQ: SHOR) with a Buy rating and a price target of $10. Analyst Eric Martinuzzi is positive on the stock ahead of the company's upcoming Connect product launch.

"In September 2015 ShoreTel will launch a new product, called Connect. Within a single code base, Connect will allow the corporate phone system and other unified communications services to be deployed on-premise, hosted in the cloud, or in a hybrid mix of the two. ShoreTel has already demonstrated its ability to win hosted business; Q3 hosted revenue was $27.2 million, up 20% y/y (Figure 1). However, we believe the arrival of the the hybrid Connect offering can accelerate recurring revenue as the company not only wins new accounts, but mines its massive on-premise installed base," said Martinuzzi.

"By FY17 we expect recurring revenue to make up 60% of the total, up from 43% in FY14. We believe this mix shift favoring recurring revenue will increase the valuation multiple from the current 1.0x EV/revenue to 2.0x –3.0x, offering investors significant upside from the current stock price," added the analyst.

For an analyst ratings summary and ratings history on ShoreTel click here. For more ratings news on ShoreTel click here.

Shares of ShoreTel closed at $7.14 yesterday.

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