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Wynyard shares soar 19% on gun deal news, analysts sees more room to go

Shares in Wynyard Group  [NZX: WYN] soared to a record, shooting up 19 percent, and could go even further according to an analyst who follows the stock.

The stock [NZX:WYN] rose as high as $3.01, and recently traded at $2.84, valuing the intelligence software developer at $305.7 million.

The rise can on the heels of the NZ security software developer announcing a deal with UK-based consultancy Arquebus Solutions to develop and supply specialist gun tracking software.

The booming tech company's favourability has been likened to younger Palantir Technologies, the US-based intelligence gathering software developer, and is part of the security specialist tech stock in favour across all markets, Forsyth Barr analyst Blair Galpin told BusinessDesk.

"Wynyard is part of the whole sector that's quite hot," Galpin said.

"Palantir raised funds late last year; applying a similar multiple would value Wynyard at $4."

He qualifies that but that Palantir had a much longer history and a different financial position.

In terms of short term price we don't normally comment on that. In terms of reviewing the valuation we look at it regularly but we will be looking for WYN to meet or exceed its forecasts and continued growth in share price from the comparative companies we look at.

"There was a lot of interest last week. People keeping an eye on them and any positive news is just reinforcing that," Galpin said.

However, last Wednesday, Galpin downgraded Wynyard from hold to reduce - a "soft" sell rating sending a signal that investors retain some shares but also look to reduce your holding and take some profits. 

"The stock was due a price increase as there had been significant movement in the security and big data space as you know so there has been some catchup in this share price. But the extent of the increase is pretty impressive and our view last week was to take some profits," Galpin told NBR today.

ForBarr's 12-month price target is $1.95.

Wynyard's stock has risen 157 percent since it listed on the market mid-last year. It has yet to return a profit, and will announce its 2013 results late February.

"These tech stocks have got to keep delivering to forecast, and hopefully over-delivering. Their share price gets punished if they fail to deliver - as in the case of Diligent," Galpin said. "They live and breathe on their last announcement."

Last week, Wynyard said it met its 2013 sales forecast $21.5 million, equating to about 62 percent revenue growth. Earlier, the company forecast its 2013 loss would widen from $3.5 million to between $4.5 million and $5.5 million. Wynyard's offer document projected 2014 revenue of $27 million. This figure is now under review, the company says.

With reporting by BusinessDesk

More by Suze Metherell and Chris Keall

Comments and questions

Wynyard's communication with the market has to be applauded.

1. However, it is hard to determine what a new contract will do for WYN revenue/bottom line. Can further guidance on that be given?

2. At what stage will WYN be big enough that it doesn't have to announce every deal? Or are them some you don't tell us about (secret squirrel)?

Harvey I believe their communication was decidedly unhelpful as it gave no financial information whatsoever for an investor to make a decision with respect to price.

There is a broader issue tend listed "technology" or "growth" companies to make these sort of announcements without any regard to including financial information, but still classifying them as price sensitive.

It is totally unhealthy for our listed market and its constituents to function where fluff good news pieces can cause wild gyrations in price. A cynic would suggest that listed companies know this to be the case. While its easier to drive share prices up with fluff good news announcements (a cynic could also wonder if these announcements are meant for investors or for media coverage) they should not be in lieu of hard financial information which will ultimately underpin (or not) share price.

Someone ask the CEO, what's the likelihood of a takeover by Palantir?

John, you can ask him anything here: