The share price for network management service provider Real Matters (TSX:REAL) is likely to take a hit following today’s news of a holdup in a top tier client deal, says analyst Robert Young with Canaccord Genuity. Nevertheless, the stock remains a “Buy” with plenty of upside, says Young.
This morning, Real Matters said the previously announced deployment of its title and closing (T&C) platform with a Tier 1 mortgage lender in the United States is now on hold, stating that the deal “will not proceed at this time due to circumstances beyond the company’s control.”
“Real Matters will continue to roll out its title and closing platform according to its originally contemplated timeline and dedicate the appropriate resources to ensure it gains market share,” the company said in a press release. “The Company remains on track to meet its previously stated financial objectives.”
Young says the setback stems from problems with the Tier 1 company’s internal bank vendor processes rather than being an issue between Real Matters and the company or an indication of poor performance by REAL’s T&C solution. The analyst also believes that Real Matters’ existing appraisal business with the client will remain unaffected, with the company reiterating its 2021 targets. At the same time, REAL’s share price will be affected.
“We expect today’s announcement to have a nominal direct impact financially, but see it as a setback on the Title 2.0 business, with a likely negative impact on the shares, already weighed by poor investor sentiment,” says the analyst in an update to clients.
Young feels the company remains in a good position to snag Tier 1 or 2 customers and that the fact that CEO Jason Smith continues to buy REAL stock is a sign that management sees value in the stock during the current period of weakness.
The analyst states that REAL currently trades at 2.4x EV/C2019 Net Revenue, which is a discount to its peer group at 6.0x. Young’s reiterated $12.00 target price represents a 12-month projected return on investment of 122 per cent.
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