NEW YORK (TheStreet) -- Shares of Envivio (ENVI) were gaining 113.4% to $4.05 on heavy trading volume Thursday following the announcement that Ericsson (ERIC) will acquire the company for about $125 million.
Ericsson will acquire all outstanding shares of Envivio for $4.10 in cash as part of the agreement.
Envivio is a leader in software-based video encoding that has an install base of more than 400 TV service provider and content owner customers including Comcast (CMCSA), Liberty Global (LBTYA), and Time Warner Cable (TWC).
The acquisition is expected to close in the fourth quarter of 2015.
"Our consumer research clearly shows that viewers are demanding TV on their terms on any device, and expecting experiences that continually evolve," Per Borgklint, Senior VP and Head of Business Unit Support Solutions at Ericsson, said in a statement. "We are committed to offering our customers a clear path towards fully agile cloud agnostic platforms that delight TV consumers."
About 6.6 million shares of Envivio were traded by 9:58 a.m. Thursday, well above the company's average trading volume of about 64,000 shares a day.
TheStreet Ratings team rates ENVIVIO INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ENVIVIO INC (ENVI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its decline in the stock price during the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- After a year of stock price fluctuations, the net result is that ENVI's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, ENVIVIO INC's return on equity significantly trails that of both the industry average and the S&P 500.
- ENVIVIO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENVIVIO INC reported poor results of -$0.58 versus -$0.46 in the prior year. This year, the market expects an improvement in earnings (-$0.17 versus -$0.58).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 84.8% when compared to the same quarter one year prior, rising from -$4.09 million to -$0.62 million.
- The gross profit margin for ENVIVIO INC is currently very high, coming in at 70.24%. It has increased from the same quarter the previous year.
- You can view the full analysis from the report here: ENVI Ratings Report