Beacon Securities analyst Gabriel Leung likes the recent news from Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH). The analyst maintained his “Buy” rating and target price of $3.75/share for a projected return of 205 per cent in an update to clients on Monday.
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 Wishpond announced it had successfully integrated Brax.io, whose acquisition was completed by Wishpond in September.
Brax, which has an advertising platform for the management of a customer’s digital ads across multiple sources, has taken plenty of initiative in the integration process, having adopted Wishpond’s outbound sales practices, which Leung said should help to accelerate growth instead of relying on inbound sales for new customer acquisition. From an operations and efficiency standpoint, Brax has integrated its product and customer support teams with Wishpond, while also integrating its shared services through account management and sales.
Both companies have also achieved good cross-selling, Leung said, which should help increase ARR and improve overall retention rates.
“Overall, we believe Brax should represent another accretive acquisition for Wishpond over the coming year (recall the company closed four acquisitions last year), which should boost confidence in management’s growth through acquisition strategy (in addition to the organic growth story),” Leung said.
Wishpond CEO and Chairman Ali Tajskandar said in a January 20 press release that he’s happy with the progress noted from Brax since its acquisition last year
“We’ve now integrated Brax across all of Wishpond’s departments and channels, positioning Brax for aggressive expansion in 2022. Brax has also developed a new outbound sales channel significantly increasing the velocity at which it can grow. We are excited to see the early traction from Brax’s outbound sales system is starting to pay off,” Ali said.
Wishpond has also made a recent change at the executive level, appointing David Pais, a technology industry veteran with previous roles at PHEMI Systems, Fortress Blockchain and Apivio Systems, as its new Chief Financial Officer on January 10. Pais succeeds Juan Leal, who will focus on strategic acquisitions and corporate development activities.
In a recent investor update hosted by the company, Wishpond management reiterated its overall growth plan, with Leung noting that the company expects to double its sales force from the current 24 to between 45 and 50 by the end of the year to help supports it organic growth target range of 30 to 40 per cent, though Leung believes the internal target is actually higher.
By the numbers, after reporting revenue of $7.9 million in 2020, Leung predicts Wishpond to hit $14.3 million for 2021, implying year-over-year growth of 81 per cent. He then projects another year of growth in 2022, estimating $20.5 million in revenue for a potential year-over-year increase of 43.4 per cent.
Accordingly, Leung’s EV/Revenue multiple projection shows Wishpond more positively, as he projects a drop from the reported 7.2x in 2020 to a projected 4x in 2021, then to a projected 2.8x in 2022.
The company’s gross profit margin continues to edge up toward 70 per cent, with Leung projecting a margin of 67.8 per cent ($9.7 million) in 2021 after reporting a 66.3 per cent margin ($5.2 million) in 2020. Leung then projects another increase to a 69 per cent margin ($14.1 million) in 2022.
Meanwhile, on adjusted EBITDA, Leung is calling for a loss of $200,000 in 2021 after posting a $500,000 positive adjusted EBITDA report in 2020, with a nod towards Wishpond’s investments in sales and marketing. However, Leung forecasts adjusted EBITDA to be positive once again in 2022 at $1.1 million for an implied margin of 5.4 per cent, along with an EV/EBITDA multiple projection of 52.4x.
Overall, Leung rates Wishpond at a discount as it trades at 2.8x compared to its peer group average of 8.2x, and expects it to remain a solid option for investors.
“Given WISH’s strong company and macro fundamentals, its clean balance sheet, which includes $7 million in cash and $6 million unused facility, and strong track record of accretive M&A transactions, we believe the stock remains a compelling investment at its current valuation,” Leung said.
Wishpond’s stock price has dropped by 39.7 per cent over the last 12 months, and 6.8 per cent in January alone. The stock is nearly a year removed from its 52-week high of $2.30/share on February 10, though it has improved since hitting a 52-week low of $1.05/share on August 18.