Synacor Inc (NASDAQ:SYNC) Scores Big

Synacor Inc (NASDAQ:SYNC) scored a major win getting a major contract from AT&T Inc (NYSE:T). AT&T chose to terminate its 15 year hosting relationship with Yahoo! Inc (NASDAQ:YHOO) and give most of that business to Synacor, which is a huge win for the small cap company. Shares of SYNC skyrocketed on the news as investors woke up and realized how undervalued Synacor remains. Yahoo's loss is now Synacor's gain.Synacor describes itself as "the trusted technology development, multiplatform services and revenue partner for video, internet and communications providers, device manufacturers, and enterprises. We deliver modern, multiscreen experiences and advertising to their consumers that require scale, actionable data and sophisticated implementation. Synacor enables our customers to better engage with their consumers."For the first quarter of 2016, total revenue was $30.3 million, an increase of 13% compared with $26.7 million in the first quarter of 2015. Recurring and fee-based revenue represented 43% of total Revenue, and grew 113% compared with the first quarter of 2015. Cash generated by operating activities was $3.9 million for the first quarter of 2016, compared with $2.2 million generated by operating activities in the same period of the prior year. First quarter 2016 operating cash flows funded both the company’s $2.5 million Technorati acquisition and the necessary expenditures to win the AT&T portal services contract. The company ended the first quarter of 2016 with $15.7 million in cash and cash equivalents, which is slightly higher than the end of the prior quarter.As a result of its updated financial forecast and incremental revenue from the AT&T agreement, the company is raising its full year 2016 revenue guidance to be in the range of $130.0 million to $135.0 million, up from the previously provided range of $125.0 million to $130.0 million. Synacor also introduced a new “Path to 3/30/300” financial plan targeting annual revenue of $300 million and adjusted EBITDA of $30 million in three years, or by 2019.The deal with AT&T calls for Synacor to develop and manage innovative desktop and mobile portal services designed to drive user engagement, populate these experiences with rich content sourced from popular brands, and monetize these experiences through search and advertising. CEO Himesh Bhise said:

“We are honored to have been selected from among the contenders AT&T considered in their evaluation process. We are thrilled that AT&T will be using our managed portal services, mobile apps, and advertising solutions in this important initiative to deepen engagement with their customers. We already are developing initial products for deployment in 2016, and have started working on a next-gen product for 2017.”

On the company earnings call, he added:

"We have an enviable and expanding global customer base of 120 service providers and 3,500 enterprises. A compelling and broad portfolio of portal advertising, email and video products, positioned in growing digital markets, and we reach over 150 million monthly visitors, 500 million email boxes, and work with 1,500 channel partners worldwide. The $300 million revenue target contemplates our base business expectations for 2016, the value we expect from AT&T, our prospects in the high-growth markets of email, advertising, video and identity management, where Synacor has strong multi-positions, and incremental opportunities in international enterprise markets. The $30 million EBITDA target contemplates benefits of scale, cost and monetization in our portal and advertising business as we add to traffic, higher margins from our recurring and fee-based businesses, and email and video."

Currently trading with a market cap of $96 million, we see SYNC as a great long-term growth story on the back of the AT&T win and future revenue growth. Shares are trading at less than one times sales and with gross margins over 50%, we see shares as being greatly undervalued. Our target on SYNC is $6 per share by the end of the year. We will be updating Insider Financial as soon as we know more. For continuing coverage on SYNC, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in SYNC and have not been compensated for this article.