Wishpond Technologies has a 233 per cent upside, says Beacon

Better than expected quarterly results have Beacon Securities analyst Gabriel Leung feeling bullish about Canadian marketing tech company Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH). Leung delivered an update to clients on Wednesday where he said Wishpond is currently trading at a discount to its peer group.

Vancouver-based Wishpond provides SaaS-based, marketing-focused online business solutions, primarily to the small and medium-sized (SMB) community with a platform that gives customers an all-in-one package including marketing, promotion, lead generation and sales conversion. 

The company reported its fourth quarter 2021 earnings on Wednesday, showing record revenue results for the Q4 and for the year. Quarterly revenue was up 107 per cent year-over-year to $4.7 million while adjusted EBITDA was $490,873 compared to $121,151 a year earlier with a margin of 11 per cent. Gross profit was $3.2 million compared to $1.5 million a year earlier, while the company hit positive cash flow from operations of $598,977 compared to $2.1 million for Q4 2020. For the 2021 year, Wishpond’s revenue was $14.8 million compared to $7.9 million for 2020 and adjusted EBITDA was $56,389 compared to $494,902 for 2020.

Wishpond said the year ahead will see upticks in its customer base and Monthly Recurring Revenue (MRR) through both organic and inorganic means, while over the first quarter of 2022 WISH said it invested in sales and marketing and operations to support organic growth. The company said revenue and earnings growth should accelerate over the second half of the year.

“2021 was a monumental year for Wishpond, as we accomplished record financial results in our first full year as a public company on the TSX Venture Exchange,” said Chairman and CEO Alli Tajskandar, in a press release. “We set an aggressive pace in the first quarter of 2021 that we maintained throughout the year with organic and inorganic growth culminating in a record fourth quarter as well as record revenue for the year. I am also very pleased with our financial performance in the fourth quarter 2021, in which we achieved record revenue and Adjusted EBITDA with 107 per cent revenue growth compared to the fourth quarter of 2020.”

Looking at the quarterly numbers, Leung said he was modelling revenue and EBITDA of $4.2 million and $202,000 compared to the realized $4.7 million and $491,000, respectively. Leung said Wishpond benefitted from positive seasonality related to recent acquisitions, notably PersistIQ and Brax.io, while also noting some (expected) churn related to both of these acquisitions which he said will slightly impact the Q1 for Wishpond.

“While both [PersistIQ and Brax.io] employ a subscription-based revenue model, they also offer products and services that can be tailored to special marketing campaigns that boost demand around various holidays and special occasions, which results in higher seasonal revenue in Q4 and a q/q decline in seasonal revenue in Q1,” Leung wrote.

Leung said with the Q4 results, he is maintaining his forecast which calls for 2022 revenue and adjusted EBITDA of $21.3 million and $0.8 million, respectively, and for 2023 revenue and EBITDA of $26.6 million and $1.6 million, respectively.

The analyst also maintained his “Buy” rating and $3.75 target price, which at the time of publication represented a projected one-year return of 233 per cent. Over the past 52 weeks, WISH has been at a high of $1.97 and a low of $0.95 per share.

On a comps basis, Leung said WISH is currently trading at about 2.1x EV/Sales versus its peer group at 5x, which is despite a comparable two-year sales CAGR of 34 per cent. As a result, the analyst said, “we continue to view the stock as being a compelling SaaS investment opportunity.”

Since the end of 2021, Wishpond completed the integration of Brax and launched a Universal Ads Editor for customers to carry out their campaigns across multiple platforms, while the company also announced a new email marketing platform with a new user-friendly interface. 

Last month, Wishpond announced a partnership with JP Libros Ediciones Oklever SA, the largest medical e-commerce platform in Mexico and Latin America, whereby the company and Wishpond will sell and support Invigo’s Evergenius software platform to medical and dental customers in Latin America. The company also recently announced the acquisition of SaaS marketing company Viral Loops. That deal was for US$1.4 million plus a performance earn-out and represented the fifth acquisition since Wishpond went public in December, 2020.

“Viral Loops has built a company with tremendous brand recognition in the industry and has demonstrated consistent, strong revenue and EBITDA growth,” said Tajskandar in an April 4 press release. “Besides growing Viral Loops as a stand-alone business, we believe there are tremendous cross-sell opportunities for offering referral marketing solutions to Wishpond’s existing customer base of over 3,000 small to medium sized businesses. We are thrilled to welcome the Viral Loops team to the growing Wishpond family.”

Disclosure: Wishpond Technologies is an annual sponsor of Cantech Letter.