Insider buying at Wishpond Technologies, Beacon reports

Beacon Securities analyst Gabriel Leung remains optimistic about Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH), maintaining his “Buy” rating and target price of $3.50/share for a projected return of 176 per cent in an update to clients on Tuesday.

Founded in 2009 and headquartered in Vancouver, Wishpond Technologies is a SaaS-based provider of marketing-focused online business solutions, with its product suite offering customers marketing, promotion, lead generation and sales conversion capabilities.

Leung’s latest analysis comes after Ali Tajskandar, Chief Executive Officer of Wishpond, acquired another 82,200 shares of the company on the open market.

“While this does not seem like a material amount, we would note that Mr. Tajskandar already owns over five million shares and has never sold stock,” Leung said. “Generally speaking, we view insider buying as a bullish data point. In the case of Wishpond, we believe our bullishness is supported by positive fundamentals.”

Leung supports the thesis by suggesting the company is on pace to deliver strong organic revenue growth over the coming quarters with projections of 30 to 50 per cent on a year-over-year basis thanks to its recent investments in sales and marketing, along with recent acquisitions, which should provide strong cross-selling opportunities for the company.

Wishpond started its third quarter by completing the acquisition of ad management software solution provider Brax.io for US$2 million, then announcing a new $6 million revolving credit facility with the National Bank of Canada’s Technology and Innovation Banking Group.

Most recently, the company announced that its Wishpond Appointments is now compatible with Zoom, as the Wishpond Zoom App is now available in the Zoom App Marketplace, which allows Wishpond’s 3,000+ customers to easily create virtual meetings.

“Zoom integration is an important addition to our Appointments product,” said Jordan Gutierrez, Wishpond’s Chief Operating Officer in the company’s October 21 press release. “Entrepreneurs and business owners can now set up virtual sales calls, customer meetings, or consultations – all in one simple step.  Zoom Meetings integration complements Wishpond’s 300+ other integrations including email, analytics, sales, payments, and other collaboration apps. We are very proud of our product development teams who continue to add new features and functionality to our all-in-one digital marketing platform.”

Leung’s financial estimates continue to show solid growth potential for Wishpond, as he projects $14.2 million in revenue for the company in 2021 (previously $13.6 million) to mark a potential 79.7 per cent year-over-year increase, followed by another jump to a projected $20.1 million (previously $18.5 million) in 2022 for a potential 41.5 per cent year-over-year increase.

From an EBITDA perspective, Leung forecasts a negative EBITDA of $500,000 for 2021 after being positive by the same margin in 2020, having strategically gone negative through the addition of new sales and marketing personnel to augment organic growth, though Leung notes that third quarter financial results could bring Wishpond back into positive EBITDA territory.

“We believe the company should reap the benefits of these rewards, which should be evidenced through accelerated organic revenue growth and positive EBITDA results over the coming quarters,” Leung said.

Leung also expects a rebound to $2.1 million in positive EBITDA for 2022 (previously $1.9 million positive EBITDA) for a projected 10.3 per cent margin.

Leung’s valuation estimates also show Wishpond’s attractiveness, as he forecasts the company’s EV/Sales multiple to drop from 7.8x in 2020 to a projected 4.3x in 2021, followed by another forecasted drop to 3x in 2022. Meanwhile, positive EBITDA in 2022 means the only EV/EBITDA multiple information available is for 2022, which Leung forecasts to be 28.8x.

Leung believes Wishpond’s trading valuation of 3x CY22 EV/Sales versus the peer group at 13.5x is just one factor of its attractiveness as an investment option.

One of Wishpond’s main comparables, SharpSpring, was acquired by private online marketing company Constant Contact for US$240 million, which represented a rate of roughly 7.4x its second quarter sales, which were up 11 per cent on a year-over-year basis, while EBITDA margins were negative 26 per cent; on the same basis, Wishpond is trading at 3.6x  run-rate sales, and is growing at a faster rate with EBITDA expected to become positive once again.

Overall, Leung believes Wishpond is an attractive investment option within its industry, with third quarter financial results in November also expected to be a catalyst for the company.

“We continue to view Wishpond as an undervalued, fast growing SaaS company, which should continue to benefit from strong industry tailwinds,” Leung said.

Overall, Wishpond’s stock price has dropped by 40.8 per cent over the course of the year, reaching a high point of $2.38/share on January 20 and bottoming out at $1.05/share on August 18.

Disclosure: Wishpond is an annual sponsor of Cantech Letter.