VersaPay upgraded to a buy at Haywood

In a research update to clients today, Sangha lowered his one-year price target on VPY from $2.30 to $2.00, while simultaneously upgrading his rating from “Hold” to “Buy”.

The analyst explained his reasoning.

“We are reducing our target price from $2.30 to $2.00 after accounting for dilution from the recently closed financing, but we are upgrading our rating from HOLD to BUY as the current share price provides a good entry point for investors.”

On October 18, VersaPay closed a $9.2-million bought deal financing that was led by Raymond James.

Sangha thinks VersaPay will generate Adjusted EBITDA of negative $11.9-million on revenue of $5.3-million in 018. He expects those numbers will improve to EBITDA of negative $7.1-million on a topline of $12.7-million the following year.

“VersaPay’s shares are down 50% from 2018 highs of $2.70 achieved at the end of May,” Sangha adds. “VersaPay’s shares have fallen due to slower than expected customer roll-outs, the dilution from the recent financing and a broader market sell-off. VersaPay’s customer roll-outs have been slower than expected as the RBC channel has only produced a handful of customers and Livingston has done a limited roll-out thus far. VersaPay currently has over 130,000 end customers and is potentially at risk of missing its target for 250,000 customers at the end of 2018.”

Sangha’s new price target represented a return of 47 per cent at the time of publication.