National Bank Financial launched coverage of payments company Nuvei (Nuvei Stock Quote, Chart, News TSX:NVEI) on Monday with an “Outperform” rating, with analyst Richard Tse saying Nuvei’s business dovetails with the secular shift to online commerce.
Montreal-based Nuvei, a global payment technology company whose proprietary platform handles gateway and back-end services involving authorization and processing of payment information, was founded in 2003 and had its IPO on September 22, 2020, issuing about 24 million shares at $26 per share for a total of $625 million in gross proceeds. An over-allotment option took the total to $730 million. Since its debut, Nuvei’s stock has gained about 20 per cent in value.
Nuvei has made a number of acquisitions over its tenure, including Cardex Payments in 2007, Tangarine Payment Solutions in 2009, Capital Processing Network in 2014, Intuit in 2015, Matrix Payment Systems in 2018, SafeCharge in 2019 and Smart2Pay in 2020.
Tse said Nuvei’s strength lies in its global reach, targeting high-growth markets from e-commerce to gaming. Currently, Nuvei has 50,000 customers and accepts payments in over 200 global markets and nearly 150 currencies, while allowing merchants’ customers to transact across 450 alternative payment methods.
“In our opinion, Nuvei’s edge comes from its ability to make the payment process simple and frictionless for its customers. That comes from the technology prowess built into its proprietary platform that’s supported by a high level of customer support service that was prominently noted in our discussions with customers. It’s the combination of the above and targeted growth markets that suggests a long-growth runway,” Tse wrote.
Tse said payments continues to undergo a meaningful transformation from formerly siloed and independent solutions to integrated services, while off-line, bricks-and-mortar systems are moving more online as the development of e-commerce continues. Further, Tse said there’s been “an explosion of growth” in alternative payment methods (APMs) — including digital wallets, mobile wallets, bank transfers and instant financing, that together now make up over two-thirds of e-commerce transactions globally — which adds complexity to merchants’ management of payments.
That’s where Nuvei comes in, says Tse, as its platform foregoes for merchants the need of contract different service providers for each stage in the payment process (from gateway, acquiring, FX management to risk management services).
“For the merchant customer, Nuvei provides convenience and a seamless experience which increases merchant stickiness to the platform as evidenced by our diligence calls where seven of 11 customers expressly stated they were looking to expand their relationship with Nuvei by adopting additional offerings/expanding usage,” Tse wrote.
Tse is estimating Nuvei will continue to grow faster than the payments industry as a whole, calling for an annual growth rate of 43 per cent (including inorganic growth) for fiscal 2020, followed by growth of 24 per cent and 15 per cent for 2021 and 2022, respectively.
By the numbers, Tse thinks Nuvei will generate 2020 revenue and adjusted EBITDA of $352 million and $137 million, respectively, followed by 2021 revenue and adjusted EBITDA of $438 million and $167 million, respectively. Tse is pairing his initial “Outperform” rating with a price target of C$70.00, which at press time represented a projected 12-month return of 42 per cent. (All figures in US dollars except where noted otherwise.)
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