Paradigm Capital analyst Daniel Rosenberg is hopeful about Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH), maintaining his “Buy” rating and target price of $2.90/share for a projected return of 184.3 per cent in an update to clients on Tuesday.
Founded in 2009 and headquartered in Vancouver, Wishpond Technologies is a SaaS-based marketing technology company for small and mid-sized businesses aiming to provide a complete solution for the digital sales and marketing needs of SMBs.
Rosenberg’s analysis comes ahead of the Thursday release of Wishpond’s second quarter financial results, which should provide positive news for the company, Rosenberg said.
“We expect rapid growth of about 73 per cent year-over-year, driven by both strong organic growth and contribution from recent M&A,” he said. “The industry has shown signs of growing trends in digitization and a shift in consumer demand toward online purchasing has created an opportunity for digital marketers — all of which support Wishpond’s continued growth.”
Paradigm Capital projections have Wishpond reporting $3.2 million in revenue for the quarter, which would mark a 12 per cent quarter-on-quarter increase on top of the 73 per cent year-over-year growth. Rosenberg notes that the company’s growth is driven both organically and by the acquisitions of PersistIQ, a sales automation software developer with a platform that successfully integrates its users’ sales communication, existing workflow, CRM and marketing automation systems, as well as Invigo Media, a marketing technology and services company primarily focused on serving medical clinics.
The Invigo acquisition led to Wishpond integrating the EverGenius software into its platform to launch Wishpond Appointments, which enables businesses to offer automated scheduling to their clients.
“Scheduling software will continue to be a vital part of both brick and mortar and online-based business for the foreseeable future,” said Jordan Gutierrez, Wishpond’s Chief Operating Officer in the company’s June 16 press release. “Leveraging the strength of EverGenius allows Wishpond Appointments to distinguish itself from other one-off calendar solutions as it comes with the power of our fully integrated marketing platform and services. This combination significantly alleviates the burden of acquiring and retaining clients for small businesses.”
Another potential revenue driver going forward for Wishpond is its testing of a new pricing structure, Rosenberg said, where self-managed packages with onboarding and training services would cost $250/month instead of its initial cap of $75/month.
Paradigm Capital forecasts an adjusted EBITDA loss of $300,000 for the quarter, which Rosenberg is attributing to the company’s investment in research and development while doubling its salesforce, which should help top line figures in the long run.
Wishpond’s enterprise value is currently $48 million, and the company has $8 million in cash available with no debt, and a basic market cap of $52 million.
Going forward, projections from Paradigm Capital and the consensus are fairly consistent with each other, as both forecast Wishpond to reach $14.5 million in total revenue for 2021, with a forecasted gross profit of $9.4 million and gross margin of 64.2 per cent. Wishpond hitting that number would represent a year-over-year increase of 83.5 per cent.
2022 projects to be even better for Wishpond, with the consensus expectation for revenue set at $19.9 million and Paradigm Capital forecasting $20 million, a potential 37.9 per cent year-over-year increase.
Both Paradigm Capital and the consensus project a negative adjusted EBITDA for 2021, with the consensus projecting a $200,000 loss while Paradigm estimates a $300,000 loss. However, all parties forecast a return to positive adjusted EBITDA for Wishpond in 2022, with Paradigm projecting $700,000 in adjusted EBITDA and the consensus projecting $800,000.
The company has been busy in the quarter, gaining approval in July to have its common shares eligible for electronic deposit with the Depository Trust Company after starting to trade its shares on the OTCQB Venture Market in June.
In addition, the company partnered with Stukent, a digital courseware provider, to introduce new real-world digital marketing and social media assignments with Wishpond’s technology on Stukent’s platform.
Rosenberg believes Wishpond is in a favourable trading position compared to some of its industry contemporaries, trading at 2.4x EV/estimated 2022 sales compared to 7.1x for its peer group.
“We believe long-term trends will be supportive of increasing the use of digital services within SMBs and Wishpond has an opportunity to establish itself as a dominant player in marketing technology in the long term,” he said. “Shares have retraced recently, leaving an attractive entry point for investors.”
Wishpond Technologies closed Tuesday trading at $1.06/share, down four cents from its opening figure of $1.10/share. Wishpond’s share price has steadily declined over the course of 2021, down 49.8 per cent since January 1 with a high point of $2.38/share on January 20.
Disclaimer: Wishpond Technologies is an annual sponsor of Cantech Letter.
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