Nuvei wins price target raise from National Bank

Strong quarterly results and an even brighter outlook for 2021 are reasons to celebrate for Canadian payments company Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), according to National Bank Financial analyst Richard Tse. In an update to clients on Wednesday, Tse left his rating unchanged at “Outperform” while raising his price target from C$85.00 to C$100.00.

Montreal-headquartered Nuvei is a provider of payment technology solutions to merchants and partners around the world, with a platform geared for high-growth mobile commerce and e-commerce markets. Nuvei’s solutions include a fully integrated payments engine with global processing capabilities, a turnkey checkout solution and a suite of data-driven business intelligence and risk management tools and services.

The company released its fourth quarter and full year 2020 financials on Wednesday, showing Q4 revenue of $115.9 million, up 46 per cent year-over-year, and adjusted EBITDA of $51.3 million, up 61 per cent year-over-year. Total dollar value of transactions processed by merchants (‘total volume’) with Nuvei rose by 53 per cent to $13.9 billion. (All figures in US dollars except where noted otherwise.)

The 2020 year featured revenue up 53 per cent to $375.0 million and adjusted EBITDA up 87 per cent to $163.0 million, with total volume rising a full 76 per cent year-over-year to $43.2 billion.

“Our performance continues to be driven by strong momentum in the high-growth verticals we serve, as well as by our customizable, scalable and feature-rich technology platform which provides one of the industry’s most complete payment technology solutions going well beyond merchant acquiring,” said Philip Fayer, chairman and CEO, in a press release.

The company said the fourth quarter represented the strongest growth yet experienced by Nuvei, driven by wallet share expansion from current merchants along with accelerated uptake of new merchants. New e-commerce business almost tripled compared to a year earlier, Nuvei said, while the company expanded its connectivity coverage over the quarter, introduced new product innovations on its platform and continued to execute on M&A.

“As we look to 2021, we remain excited about the opportunity ahead of us with the momentum of our current customers and the strength of our new business pipeline which is reflected in our financial outlook,” Fayer said.

On that outlook, management offered guidance of 2021 Q1 revenue and EBITDA of $136-$142 million and $60-$63 million, respectively, and full 2021 revenue and EBITDA of $570-$600 million and $252-$265 million, respectively.

Nuvei’s Q4 numbers beat Tse’s forecast, with the $115.9-million in revenue arriving higher than Tse’s $104.4-million estimate as well as the consensus call for $109.7 million, while adjusted EBITDA of $51.3 million was also better than Tse’s $43.1 million and the Street’s $46.1 million.

Those top and bottom numbers were strong but the big takeaway for Tse was management’s outlook for 2021, which was better than expected.

“While acquisitions are contributing to the strong outlook, Nuvei is seeing continued momentum in organic growth based on our assessment. Bottom line, the Q4 results have the Company tracking to the investment thesis laid out in our recent initiation of coverage report ‘New Kid on the Block,’” Tse wrote.

Tse said Nuvei’s edge comes from its global footprint which continues to expand all the while the company maintains its ability to operate locally through a broad set of alternative payment methods (APMs).

“Furthering the breadth, Nuvei expanded its payout capabilities, now supporting ACH (automated clearing house) payments and MasterCard MoneySend,” Tse said. “From a regulatory standpoint Nuvei enhanced its platform to comply with PSD2 customer authorization requirements. We expect the build-out of these value-add services will continue to differentiate Nuvei and add stickiness to the platform.”

On the acquisition front, Nuvei closed on the acquisition of integrated payments solution Base Commerce on January 1, 2021, with the terms of the deal not disclosed, but Tse noted that Base Commerce processes about $14 billion annually in automated clearing house volume and more than $2 billion annually in credit card acquiring volume.

“The acquisition of Base Commerce provides Nuvei with proprietary ACH processing which expands its payout capabilities (recall payout is a key offering in the gaming market). It’s also another example of the Company’s expanding set of services in Nuvei’s acquiring portfolio and enhances its sponsor bank coverage,” Tse wrote.

For 2021, Tse is now calling for revenue and adjusted EBITDA of $594.9 million and $257.5 million, respectively, and for 2022 revenue and EBITDA of $726.4 million and $326.8 million, respectively. At the time of publication, Tse’s new C$100.00 target represented a projected 12-month return of 43.4 per cent.

“We continue to believe Nuvei is at the forefront of a payments market that continues to undergo a meaningful transformation. Within that market Nuvei remains a disruptive player with outsized growth relative to the sector,” Tse wrote.