On Monday, Sangha upgraded VersaPay from “Hold” to “Buy” and raised his one-year price target on the stock from $2.00 to $2.75, implying a return of 22.2 per cent at the time of publication.
The analyst explains that introducing a forecast for fiscal 2019 is the reason for his bullish new take, overriding concerns about minor delays in the preceding two years.
“We are forecasting 102% revenue growth in CY17, followed by 195% growth in CY18 and 88% in CY19,” he says. “We made no changes to our CY17 forecast. We lowered our CY18 revenue forecast due to initial delays with RBC, and we pushed out the Company’s EBITDA breakeven point from Q4CY18 to mid-CY19 due to increased sales and marketing costs. We estimate VersaPay’s revenue will increase to $9.0M in CY18 (previously $9.9M) with an Adj. EBITDA loss of $4.0M (previously loss of $3.4M). We are introducing our CY19 forecast for revenue of $16.9M with Adj. EBITDA of $0.4M. We are forecasting 250,000 end customers and 300 signed suppliers by the end of Q4CY18.”
On Wednesday, VersaPay will report its Q3, 2017 results. Sangha expects the company will post an Adjusted EBITDA loss of $1.8-million on revenue of $800,000.
Sangha says VersaPay, on the heels of a recent $10.7-million financing, is increasing its investments to drive growth.
“VersaPay is ramping up its go-to-market strategy through channel sales with banks and ERP vendors, and through its own direct sales team,” the analyst says. “We are expecting the Company to expand its U.S. sales team in the coming quarters. We believe VersaPay could also announce one U.S. bank and one more Canadian bank in 2018, which would drive revenue growth in 2019.”