Raymond James analyst Steven Li remains engaged with EMERGE Commerce (EMERGE Commerce Stock Quote, Charts, News, Analysts, Financials TSXV:ECOM), maintaining an “Outperform 2” rating in an update to clients on Wednesday.
Owner and operator of niche e-commerce brands, Toronto-headquartered EMERGE Commerce has online marketplaces including including WholesalePet.com, trulocal.ca, BattlBox.com, UnderPar.com, JustGolfStuff.ca, CarnivoreClub.co, WagJag.com and BeRightBack.ca.
Li’s latest analysis comes after the company provided an update on its sales numbers for the month of November, which were a record for EMERGE in terms of gross merchandise sales (GMS).
EMERGE said it reached $10 million in GMS to exceed the company’s mark for the entire third quarter, with Black Friday and Cyber Monday initiatives having an impact. EMERGE said that recent pickup WholesalePet.com hit double-digit organic growth for the month with strong profitability and positive cash flow.
“In November, we saw a glimpse of the power of the combined portfolio at our new collective scale, as GMS this past month exceeded our entire reported GMS from Q3 2021, and we recorded our first $1 million GMS day on Cyber Monday,” said CEO Ghassan Halazon in a press release.
“We are pleased to report that WholesalePet.com is having a terrific first month so far under EMERGE. One of our favorite stats from this business is that the average tenure of our top 10 customers is approximately 10 years, a testament to the unprecedented level of loyalty on the platform. Combining strong repeat customer lifetime value (“CLTV”) with an average EBITDA margin of nearly 75 per cent is a winning formula that we believe will continue to stand the test of time,” he said.
Commenting on the update, Li said, “Datapoints we gleaned from the recent Black Friday-Cyber Monday (BFCM) period suggest most portfolio companies having double-digit organic growth. JustGolfStuff achieved the highest growth rate for the period, coming in at 100 per cent year-over-year but other brands, such as: UnderPar Canada, Battlbox.com and WagJag also experienced double-digit growth during BFCM. BFCM does not really impact truLOCAL which we believe remained flattish year-over-year.”
“Based on the preliminary results for both October and November, we believe Q4 is shaping up as a strong quarter thus far,” Li said.
The analyst noted a new development in the form of insider buying.
“Some recent insider buying (CEO, CFO, COO and directors) ~100k shares,” he said. “Noteworthy as it’s the first time. ”
Li’s financial projections remain in place, projecting a jump from the $9 million in reported revenue in 2020 to $34 million in 2021, representing a 278 per cent year-over-year increase. From there, Li projects another revenue spike to $64 million in 2022 for a projected year-over-year increase of 88.2 per cent. His EV/Revenue multiple projections also remain unchanged, as he projects a drop from the reported 11.2x in 2020 to 3x in 2021, then to a projected 1.6x in 2022.
From an EBITDA perspective, Li projects a $1 million figure in 2021, with a forecasted increase to $7 million in 2022 for a margin of 10.9 per cent. Li also introduces EV/EBITDA multiple projections in 2022, setting his initial forecast at 13.8x.
Disclosure: EMERGE Commerce is an annual sponsor of Cantech Letter.