Nuvei delivered a strong Q2: National Bank Financial

National Bank Financial analyst Richard Tse is riding the wave of Nuvei Corp (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), reiterating his “Outperform” rating while raising his target price in his latest update to clients on Tuesday.

Headquartered in Montreal, Nuvei is a global provider of payment technology solutions to merchants and partners in North America, Europe, Asia Pacific and Latin America with its own proprietary technology platform for the mobile commerce and e-commerce markets.

Tse’s latest analysis comes after Nuvei reported better than expected second quarter financial results.

“In our view, we think the company is just scratching the surface given its meaningful breadth – from products, verticals, to geographic markets,” Tse said. “Given the better than expected execution to date, it’s not surprising why Nuvei is also filing to list its shares on the NASDAQ – an event we think will broaden the brand and investor base.”

Nuvei reported revenues of $178.2 million in the quarter, a 114 per cent increase year-over-year, with approximately 68 per cent of the revenue being organic, beating Tse’s expectation of $158.9 million and the consensus projection of $157.8 million and after acquiring one-stop payment solutions Smart2Pay and Base Commerce. (All figures in US dollars except where noted otherwise.)

The company’s adjusted EBITDA came in at $79.4 million, ahead of the $68.1 million estimate shared by both Tse and the consensus. 

“We achieved total volume, revenue, and Adjusted EBITDA growth of 146 per cent, 114 per cent, and 112 per cent, respectively, over the second quarter of 2021, as we continue advancing our strategic initiatives, expanding global connectivity and market opportunity, delivering full-stack leading edge payment technology solutions to help our merchants connect with their customers by making the world a local marketplace,” said Philip Fayer, Nuvei’s Chair and CEO in the company’s press release.

“Our accelerated investments in product, innovation, distribution and talent are driving performance and laying the foundation for sustainable growth. We are proud of our results and are consequently raising our financial outlook for the full year 2021 and providing medium and long-term growth targets,” Fayer said.

Looking ahead, Nuvei said its strong performance and continuing momentum are cause for a raise in its guidance, with the company now calling for third quarter revenue of $690-$705 million (previously $610-$640 million) and adjusted EBITDA of $295-$305 million (previously $264-$277 million).

“The updated financial outlook and specifically the Adjusted EBITDA reflects the Company’s strategy to accelerate its investment in distribution, marketing, innovation, technology as well as the infrastructure resulting from the recent acquisition of Mazooma.  The Company expects these investments will support its growth plan,” said Nuvei in the press release.

Nuvei’s strong quarter prompted a re-evaluation of Tse’s estimates and valuations for the company, with revenues now expected to reach $703.1 million in 2021, marking a year-over-year increase of 87.5 per cent over 2020’s reported $375 million in revenues, with a forecasted spike to $915.7 million for 2022, marking a potential 30.2 per cent year-over-year increase.

Tse also forecasts Nuvei’s adjusted EBITDA to be on a similar trajectory, projecting a move to $301.1 million in 2021 from the reported $163 million in 2020, an 84.7 per cent year-over-year increase with a 42.8 per cent adjusted EBITDA margin. Tse forecasts 2022 to yield $393.4 million in adjusted EBITDA for the company, putting the adjusted EBITDA margin at 42.9 per cent.

Tse also sees cash flow projections spiking, forecasting a growth to $254 million in cash flow from operations ($229 million free cash flow) in 2021 from $93 million ($74.3 million FCF) in 2020, then another jump to $310 million ($283.8 million FCF) in 2022.

On valuation multiples, Tse is forecasting the EV/Sales multiple to drop from 35.8x in 2020 to 19.1x in 2021, then again to 14.7x in 2022. The EV/EBITDA multiple is projected to fall from an estimated 44.6x in 2021 to 34.1x for 2022, with the price-earnings ratio dropping from a projected 68.3x in 2021 to 57.7x in 2022.

Nuvei has announced a number of significant partnerships and acquisitions in recent months, including the completed acquisition of Mazooma Technical Services, which specializes in igaming and sports wagering payment technology, the launch of mobile payments for KFC Espana as a joint venture with Judopay, as well as a partnership with Discover Global Network to help increase the acceptance of eCommerce.

“The recent announcement that Nuvei is an official payment solutions provider for Salesforce Commerce Cloud is positive not just for the potential revenue contribution of such partnership but also in terms of validating Nuvei’s offering, the importance of which cannot be understated as the Company looks to scale its brand more aggressively,” Tse wrote.

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

Nuvei Corp saw a nice bump in share price on Tuesday, rising almost 16 per cent to C$119.07. The stock is currently up 53 per cent year-to-date. Tse has coupled his “Outperform” rating with a new target of C$150.00 per share, up from C$120.00 per share and representing at press time a projected one-year return of 27.1 per cent.