Bloom Burton Securities analyst Prasath Pandurangan is sticking to his guns after the latest quarterly results from Newtopia (Newtopia Stock Quote, Chart, News TSXV:NEWU).
In a client update on Thursday, Pandurangan reiterated his “Buy” rating and $1.75 per share target for NEWU, which at press time represented a projected 12-month return of 250 per cent.
Toronto-based Newtopia is a biometrics company with a telehealth-enabled platform featuring genetics, coaching, nutrition and exercise programs with a focus on risk-bearing employers and insurers.
The company on Wednesday reported its first quarter ended March 31, 2020, results, which featured revenue up 119 per cent to $3.86 million and gross profit up 142 per cent to $1.65 million. The company’s gross margin also rose from 39 per cent to 43 per cent.
Newtopia, which debuted on the Venture exchange in May in the middle of the COVID-pandemic, with the company saying in the quarterly press release that despite COVID-19-related health restrictions limiting consumer mobility and access to services, its platform has nonetheless seen “some of its highest levels of engagement to date” since the onset of the pandemic.
“As a personalized virtual engagement and habit change company we are built to perform in this challenging environment, helping to mitigate escalating healthcare costs for risk-bearing employers and insurers,” said Jeff Ruby, founder and CEO, in the press release.
“Coupled with our one-size-fits-one diabetes prevention program becoming the first precision health program to receive full accreditation from the Centers for Disease Control and Prevention (CDC), it's clear that our unique approach is gaining traction in the marketplace,” said Ruby.
On the quarterly numbers, Newtopia’s $3.9-million top line was a hair above Pandurangan’s $3.8-million estimate while the Q1 EPS loss of $0.10 per share was larger than the analyst’s $0.08 per share estimate.
In his comments, Pandurangan pointed to Newtopia’s having now achieved full CDC recognition of its alternate diabetes prevention program and is now among 15 digital diabetes prevention programs with a full recognition status but the only one with a precision health approach.
“The COVID-19 pandemic has made potential clients more receptive to Newtopia’s value proposition, however, the uncertainty has also delayed decision making by employers.
Pandemic-related closures in some locations have also affected the ability and/or willingness of employees to undergo biometric tests but their impact on participation rates is unclear yet,” said Pandurangan.
“With a net cash usage of $0.3 million during the quarter, Newtopia had $2.1 million cash on its balance sheet as at March 31, 2020, and continues to target cash flow breakeven by 1Q-2021. We have made relatively minor adjustments to our model to reflect this quarter’s performance,” the analyst wrote.
Looking ahead, Pandurangan is calling for $12.6 million in revenue and an adjusted EBITDA loss of $4.2 million in 2020 and for $22.5 million in revenue and an adjusted EBITDA loss of $0.8 million in 2021.
So far, NEWU’s share price is down 26 per cent from its IPO date of May 4, 2020.