Paradigm Capital analyst Daniel Rosenberg has raised his price target on Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH) after hosting recent marketing meetings with the company.
In an update to clients on Monday, Rosenberg reiterated his “Buy” rating, saying Wishpond has a chance to assert itself as a dominant player in the marketing technology space.
Vancouver-based Wishpond is a provider of market-focused online business solutions with an all-in-one suite of products including marketing, promotions, lead generation and sales conversion. The company also provides managed services to support companies in their marketing campaigns.
WISH quickly shot up after its debut on the Venture Exchange in mid-December, going from an RTO price of $0.75 to as high as $2.53 before the year was out. Since then, the stock has drifted lower and is currently trading in the $1.70-$1.80 range.
From Paradigm’s marketing meetings with Wishpond, Rosenberg said CEO Ali Tajskandar and CFO Juan Leal showed an optimistic outlook for continued strong organic growth along with an active M&A pipeline.
Notably, management revealed plans to double its sales force by mid year and aimed at further expansion down the line.
“The company is seeing internal metrics around the cost of acquisition (life time value to customer acquisition cost at ~3.5 to one) as very attractive and holding strong even as the company scales,” Rosenberg wrote.
“Wishpond’s ability to deliver value to an underserved segment of businesses has led to strong growth and retention numbers. The company is growing rapidly at ~30 per cent per year with industry-leading retention. Notable to us is that Wishpond provides this functionality and a full-service offering without compromising profitability,” Rosenberg said.
“We see a meaningful opportunity for Wishpond to exploit a gap in the market and drive significant shareholder value,” he said.
On the M&A front, Wishpond has been busy since becoming public in December, acquiring Invigo Media Corp in January, a Surrey, BC, SaaS marketing services company to medical and related businesses in Canada and the US, bought for a total of about $3 million including earnouts. Then in early March, Wishpond bought sales automation software developer PersistIQ again for up to $3 million including earnouts.
On the PersistIQ acquisition, Wishpond said its products help shorten the sales cycle and to personalize sales campaigns. Both PersistIQ and Wishpond itself were recently highlighted by G2, a business software reviewer, which named PersistIQ a “High Performer” in the Sales Engagement category and Wishpond the “Best Estimate ROI” product for Winter 2021.
On the PersistIQ acquisition, Tajskandar wrote in a March 1 press release, “This is our second acquisition and is in line with our strategy to grow inorganically through tuck-in acquisitions of innovative marketing and sales technology companies. PersistIQ broadens our portfolio of products and services for small to medium sized businesses and offers tremendous cross-selling opportunities into our existing customer base.”
Speaking to Rosenberg on its acquisitions, Wishpond said the two new additions will continue operating under their respective brands due to the reputational strength they’ve already developed in their respective target markets.
“The company has an active pipeline of opportunities looking for both complementary technologies and new customer relationships. The company indicated that it would like to complete two acquisitions this year and emphasized a disciplined approach when thinking through valuations,” Rosenberg said.
The analyst said Wishpond’s progress on hiring and its showing on organic growth are cause for a slight increase to his revenue forecasts for 2021. Rosenberg is now calling for full-year 2020 (Wishpond has yet to report its fourth quarter 2020 financials) revenue and adjusted EBITDA of $7.8 million and $0.4 million, respectively, 2021 revenue and EBITDA of $13.3 million (up from $13.0 million) and negative $0.5 million (down from $1.1 million), respectively. For 2022, the analyst is calling for $18.7 million in revenue and $1.4 million in EBITDA.
With the updated numbers, Rosenberg is now pairing his “Buy” rating with a raised $2.90 target (previously $2.60), which at the time of publication represented a projected one-year return of 65.7 per cent.
“We value Wishpond using 7.5x EV/2022e Sales (previously 10x on 2021 estimates), in line with comparables,” Rosenberg said. “Our valuation does not assume any M&A activity. Our comparable peer group trades at an average 8.3x EV/2022e sales and Wishpond currently trades at 4.4 EV/2022e sales. We believe long-term trends will be supportive of increasing the use of digital services within SMBs where Wishpond has an opportunity to establish itself as a dominant player in marketing technology in the long term.”
Wishpond last reported its financials on December 16, 2020, where its third quarter hit record quarterly revenue of $2.1 million compared to $1.5 million the previous year, while adjusted EBITDA was $175,653 compared to $116,495 for the Q3 2019.
In early February, Wishpond closed on an $8.05-million bought deal including an over-allotment.
Disclosure: Wishpond is an annual sponsor of Cantech Letter