An accelerated trend in e-commerce along with a fragmented competitive marketplace are key factors that SaaS-based platform Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News TSXV:WISH) currently has in its favour, says Beacon Securities analyst Gabriel Leung who launched coverage of the company and stock on Monday with a “Buy” rating and $2.25 target price.
Founded in 2009, Wishpond provides marketing-focused online business solutions and offers an all-in-one suite of services with marketing, promotion, lead generation and sales conversion capabilities, effectively replacing a company’s marketing functions with one ease-of-use platform. In addition to its software, Wishpond has subscription-based managed marketing services, giving customers access to Wishpond’s team of marketing experts to support design, launch and maintenance of digital marketing campaigns including campaign design and management, online advertising SEO and landing page design.
The company made its public listing debut on December 11 on the Venture exchange through a reverse takeover of Antera Venters and related share consolidation, starting off with an aggregate of about 2.7 million common shares outstanding. The public listing also included a concurrent $4.6-million financing at $0.75 per share.
“We are very excited to be listed on the TSXV,” said Ali Tajskandar, Chairman and CEO of Wishpond, in a December 11 press release. “Being publicly listed significantly increases our profile, and our recently completed financing of $4.6M provides us with the capital necessary to execute on our current business opportunities. We look forward to providing investors with an update on our growth plans and acquisition prospects in the coming months.”
In his coverage initiation, Leung pointed to the COVID-19-accelerated online shopping trend, pointing to a report by research firm Digital Commerce 360 that said over the first half of 2020 consumers spent $347 billion online with US retailers, up 30.1 per cent year-over-year. In the second quarter 2020 alone, online spending was up 44.4 per cent year-over-year and e-commerce penetration hit 20.8 per cent in the Q2 versus 14.7 per cent a year earlier and 16.2 per cent for Q1 2020. The analyst said US consumers are poised to spend about $198.73 billion with online retailers over the holiday season (November through December), which would represent a 43.3-per-cent year-over-year increase and at 26.1 per cent online penetration versus 19.2 per cent a year earlier.
“Many industry experts believe that COVID-19 has effectively accelerated digital adoption by five-plus years. And while brick-and-mortar stores will likely always play a role in retail, clearly, much of retail spending has clearly shifted permanently to online channels.,” Leung said.
“The transition into the online space comes with many challenges, especially for SMBs who lack the resources and expertise required to launch expensive marketing campaigns whether with agencies or niche, siloed marketing tools (which lack interoperability). We believe this has created a significant opportunity for Wishpond and its ‘all-in-one’ marketing suite,” Leung wrote.
Wishpond currently serves over 2,000 customers including several blue-chip names, while most of its customers are small-to-medium-sized from a variety of industries. The analyst said Wishpond has spent years understanding the challenges of the average small business entrepreneur and put that into its design of its cloud-based applications and services aimed at empowering entrepreneurs in their marketing capabilities and at a fraction of the cost charged by digital marketing agencies for comparable solutions.
Leung noted what he called Wishpond’s aggressive development schedule into 2021, including added features such as an online payment processing system, online scheduling, a marketing funnel, an analytics dashboard and lead database enhancements, all which should further enhance the company’s value proposition, according to Leung.
As far as the market for Wishpond’s products goes, Leung said the company’s competition comes in three forms: digital marketing providers, marketing agencies and technology-enabled managed marketing service providers. On the market for digital marketing software, the analyst said it’s currently a highly fragmented space with companies offering a variety of technologies, while managed marketing services is also very fragmented and mostly made up of firms generating less than $1.5 million in annual revenues.
By contrast, Leung argued that Wishpond offers strong competitive differences with its cohesive platform, centralized analytics, cost efficiency, consistent quality, service component and integration capabilities with key external providers like Shopify, salesforce.com, MailChimp, SurveyMonkey, Twilio and Slack.
“While thanks to its recent RTO financing the company expects to scale its outbound sales team (from 12 to 25 in 2021 and 45 in 2022), along with its sales support and managed services headcount, we expect management to maintain its cost discipline and expect the company to remain EBITDA positive during our forecast period. Recall the company has ~$5.5 million in cash and no debt. The company currently has ~130 employees (which includes ~90 full-time contractors),” Leung said.
The analyst is modelling for 20 per cent year-over-year growth in calendar 2020 and 30 per cent for both 2021 and 2022.
Leung thinks Wishpond will generate calendar 2020 revenue and EBITDA of $7.3 million and $70,792, respectively, calendar 2021 revenue and EBITDA of $9.4 million and $384,476, respectively, and calendar 2022 revenue of $12.3 million and $1.1 million, respectively. At press time, Leung’s $2.25 target represented a projected one-year return of 114 per cent.
Disclaimer: Wishpond is an annual sponsor of Cantech Letter.