Stifel Maintains on ShoreTel

In a report published Friday, Stifel analyst Sanjiv Wadhwani maintained a Buy rating on ShoreTel (NASDAQ: SHOR), raising its price target from $7.50 to $12.00.

According to the report, the price target raise is based on 1.8x EV/2014E sales.

The report further asserted that SHOR is highlighted as a key participant in the hosted voice market, with 25% of the company's revenues coming from that market. The global market penetration for hosted voice is rather low at 14% with Synergy predicting global hosted voice market will grow at 41% CAGR over 2013-2017.

“For ShoreTel, key drivers for 2014 will be the continued traction and growth of the company's cloud-based hosted voice business,” the report said. “The hosted voice model typically sees a break-even profit level after two years, with the typical customer staying on for 7-10 years. After year two, margins from cloud customers are fairly high.”

Some risks to SHOR include a decline in premise business and potential price competition from low-end, low-cost UCaaS competitors like 8x8 and RingCentral, which attempt moving up-market into SHOR's mid-market enterprise space.

SHOR closed Thursday at $9.25.