VersaPay’s (TSXV:VPY) promising cloud business is a much bigger opportunity that its stable legacy business, says Cantor Fitzgerald Canada analyst Justin Kew.
On Friday, VersaPay reported its Q3, 2014 results. The company lost $1.1-milion On revenue of $5.1-million, up from a topline of $4.8-million in the same period a year prior.
“The third quarter is a traditionally strong quarter for our POS Merchant Services business and this year has proven to be no exception,” said CEO Craig O’Neill.”We are very pleased with the results achieved by our POS group, surpassing its record quarter in second quarter and renewing a number of major accounts. Further, we continue to make good progress in the VersaPay Solutions business as we implement our early customers and enhance the ARC platform based on valuable customer feedback. We are also delighted that Art Mesher has stepped into the role of chairman, and I look forward to leveraging his deep expertise in leading tech companies and his strong record building shareholder value.”
Kew says his investment thesis remains the same as when he launched coverage on VersaPay this past summer. He says there is a “tremendous market opportunity” for the company’s Electronic Invoice Presentment and Payment solution, limited competition, and a board that has deep expertise in software and payment processing.
But the analyst says his gaze is fixed squarely on VersaPay’s cloud-based Accounts Receivable Cloud (ARC) opportunity.
“This ARC product is nascent,” says Kew, “but all of the factors for high growth are in place: a massive addressable market, low penetration of accounts receivable (AR) automation tools and limited competition”.
In a research update to clients this morning, Kew maintained his “Speculative Buy” rating and one-year target of $1.75 on VersaPay, implying a return of 30% at the time of publication.