It’s been a whirlwind 12 months for Canadian payments tech company Nuvei (Nuvei Stock Quote, Charts, News, Analysts, Financials TSX:NVEI) and while there’s likely upside from current levels based on the company’s growth prospects, portfolio manager Kim Bolton thinks investors ought to tread carefully and be aware of what they’re getting into.
“We follow it but we don’t own it,” said Bolton, president of Black Swan Dexteritas, who spoke on BNN Bloomberg on Wednesday.
“If you go back to last fall Nuvei was all the way up to about $175 and now here we are sitting just under $50 so it’s off like 70 per cent from its high. But it’s a big company and they just went through a reporting period and management was extremely bullish on their business,” he said.
Montreal-based Nuvei burst onto the scene as a publicly-traded company in 2020 with the largest-ever IPO for a Canadian tech company, raising $805 million in the process. But the company itself had a long build-up before that, having been founded by CEO Philip Fayer almost two decades ago and has been working its way up the ranks in the payments space. Nuvei has concentrations in sports betting where some of the biggest online players are its customers while also focusing on the digital asset field and cryptocurrency payment solutions.
But while Nuvei’s first stretch as a pubco was a good one, with the stock rocketing up about 280 per cent between September 2020 and 2021, the intervening period has been less so. There was last fall’s general market rotation away from tech stocks toward more defensive plays in the market and then came in December a short-seller report on Nuvei which criticized the company’s accounting and investor confidence was severely rattled. To top it off, the payments space as a whole has been crushed this past year. PayPal Holdings is down an incredible 75 per cent since last July, Block Inc is down a similar 72 per cent. Even fintech stalwarts like Visa are down 20 per cent over that stretch.
The outcome is that NVEI is essentially back where it started, down at around $50 and leaving investors wondering if there’s more pain to follow or whether the turnaround in nigh.
Either way, Bolton says shareholders have to be prepared for volatility with a name like this.
“It participates in the e-commerce space but it’s just been brushed very much like Shopify, which was it was up around $1500 and then now is down around $400. So, if you’re going to own some of these stocks in the technology arena, you do have to have the ability to defend those long positions,” Bolton said.
Nuvei delivered its latest quarterly report last month where the company’s first quarter 2022 featured top and bottom line beats of analysts’ consensus calls. The Q1 showed revenue up 43 per cent year-over-year to $214.5 million, with the company saying its organic revenue growth was at a 32 per cent clip.
Net income fell from $27.8 million a year ago to $4.5 million, adjusted EBITDA increased by 40 per cent to $91.6 million and adjusted earnings were $0.46 per share. The company said the drop in net income was due to a $33.1 million increase in share-based payments to employees who joined the company through acquisitions and other employee incentives. Analysts had expected $211.6 million in revenue and $0.41 per share in earnings. (All quarterly figures are in US dollars.)
Management said it was sticking by its earlier guidance, calling for full 2022 revenue between $940 and $980 million and adjusted EBITDA between $407 and $425 million.
“We had a strong start to the year, with financial results that exceeded our financial outlook for the quarter,” said CEO Fayer in a press release. “Total volume, revenue and Adjusted EBITDA grew 42 per cent, 43 per cent and 40 per cent, respectively over the first quarter of 2021, as we continued advancing our strategic initiatives. We remain intently focused on our key priorities and reiterate both our financial outlook for 2022 and our medium and long-term targets.”
Last week, Nuvei launched a new risk management model for its payments platform, one which incorporates machine learning to determine risk levels and detect fraudulent payments activity. The company said merchants using the platform will see improvements as high as 30 per cent in fraud detection.
“We continue to invest in our AI and data management. We are constantly innovating our products to develop features that reduce fraud and maximize revenue for our customers through customized solutions that meet their exact needs,” Fayer said in a press release.
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