Why Mitel Networks Stock Surged Today

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What happened

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.

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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

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.