Why Mitel Networks Stock Surged Today

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What happened

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Shares of Mitel Networks (NASDAQ: MITL) have surged today, up by 12% as of 12:15 p.m. EST, after the company got a bullish rating from Wall Street. Craig-Hallum initiated coverage of Mitel with a buy rating.

So what

Alongside the bullish rating, analyst George Sutton assigned a price target of $14, representing significant upside from current levels even after today's pop.

Mitel customers have roughly 70 million on-premise users that will probably upgrade their telecommunications equipment in the years ahead, and this is a meaningful opportunity for Mitel to convert that large user base, according to Sutton.

Now what

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Mitel completed its acquisition of ShoreTel recently, which CEO Rich McBee says will accelerate the company's cloud strategy and strengthen its position in the unified communications-as-a-service (UCaaS) market. Mitel also hit a new milestone recently, with recurring cloud seats surpassing 1 million.

Sutton's view is that those upgrades will occur within the next seven to 10 years, which could provide a runway for growth if Mitel can successfully execute in converting users.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.