Canadian payment solutions provider Nuvei (Nuvei Stock Quote, Charts, News, Analysts, Financials TSX:NVEI) is down by about half of its previous highs but that doesn’t necessarily make the stock a bargain, says portfolio manager Christine Poole of GlobeInvest Capital Management, who prefers the more established Visa (Visa Stock Quote, Charts, News, Analysts, Financials NYSE:V) in the payments space.
Nuvei had a heck of a first full year as a public company. The now $11-billion market cap Nuvei debuted in the fall of 2020 as the biggest tech IPO in the history of the TSX, raising $700 million by up-selling 26 million shares at C$26 per share. Montreal-based Nuvei saw its share price steadily rise over the next 12 months where it reached as high as C$171 in September 2021 before pulling back to about the C$120 range by mid-November.
Then came a short report from Spruce Point Capital Management claiming a lack of transparency on the part of Nuvei’s management on the company’s revenue and earnings. That pulled the rug out from under the stock and brought it to where we’re at today in the $80 range, still a tremendous windfall for early investors but a result after a year and three months that might give potential new investors pause before buying, even at NVEI’s currently reduced prices.
But Nuvei’s pullback has to do with more than its own predicament, Poole says, as a general market rotation away from growth names is likely also playing a role.
“It’s not one I follow closely,” said Poole, managing director at GlobeInvest, who spoke on BNN Bloomberg on Tuesday. “It just went public in 2020 has done very well, but it has been hit with this latest sensitivity to higher interest rates. A lot of these are high momentum growth stocks where the earnings or the future [earnings] may not necessarily support the valuation, so I think the stock has pulled back.”
Poole says she prefers Visa in payments, a sector that has had its own ups and downs over the past year, with many of the stocks in the fintech space slipping in recent months.
“Within that payment space I’ve gone with Visa which is much more global. Nuvei may potentially be a small, niche competitor but it’s not a stock that we own and we’re not interested in adding to our client portfolio,” Poole said.
By comparison, Visa had net revenues of $6.6 billion for its latest quarter, up 29 per cent year-over-year, and net income of $3.6 billion or $1.65 per share. For Nuvei, revenue shot up by 96 per cent year-over-year during its third quarter 2021 to $183.9 million while net income went from a loss of $77.9 million a year ago to a gain of $28.0 million. The volume of payments processed by Nuvei increased by 88 per cent year-over-year to $21.6 billion for its third quarter. (All figures in US dollars except where noted otherwise.)
“Our performance is driven by our unrelenting focus on helping our customers connect further with their customers regardless of country, currency, or payment type through our single integrated platform,” said Nuvei chair and CEO Philip Fayer in the company’s November 9, 2021, third quarter press release.
“We continue to experience significant momentum in the business and are well-positioned for sustainable and profitable growth. We are proud of our results and raising our financial outlook for the full year 2021 and reiterating our previously announced medium and long-term growth targets,” he said.
In recent months, Nuvei has been moving into the sports betting field in the US, announcing its entry into a number of states while in October Nuvei announced a partnership with sports betting, poker and iGaming platform BetMGM to act as its payment service in its online business in the United States. That added to its deals with other online gaming and sports betting services like 888 and SI Sportsbook, Carousel Group as well as the Dutch online casino Holland Casino.
Nuvei issued a response after the Spruce Point report came out in early December, with the company making no changes to its financial outlook and urging investors to “not make decisions” based on the short report but to review Nuvei’s public filings including its third quarter financial results.
“Nuvei believes the recent report issued by a short seller is intentionally misleading and draws inaccurate conclusions, innuendo and character attacks on key executives, among numerous other issues. The personal attacks on Nuvei executives made by the short seller appear to have been made to distract from the Company’s achievements and progress,” the company said in a December 8 press release.
So far in 2022, Nuvei’s share price is down by about two per cent.