Beacon Securities analyst Gabriel Leung is calling Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH) a compelling investment idea which is trading well below its peer group average. On Wednesday, Leung delivered a report to clients on the company’s preliminary second quarter announcement, saying the Canadian market tech firm’s Q2 looks to be a strong rebound from the company’s seasonally slower Q1.
Vancouver-based Wishpond, a SaaS-based provider of marketing-focused business solutions, announced preliminary Q2 numbers on Wednesday, saying it expects to hit record revenues in the quarter, with its annualized revenue run-rate now registering above $20 million for the first time.
Wishpond Chairman and CEO Ali Tajskandar said he expects Wishpond to be cash flow positive in the second half of the year due to revenue growth and cost-saving initiatives.
“We are thrilled with our preliminary results for the second quarter of 2022,” said Tajskandar in a press release. “Our sales pipeline remains robust and our revenue growth shows tremendous resilience despite the uncertain economic environment.”
Wishpond, which focuses on the small and medium-sized business (SMB) environment said their revenue growth has not been hampered by current macroeconomic factors including high inflation, rising interest rates and supply chain disruptions. And the company said investments in its sales and marketing teams have born fruit in terms of organic growth, while management also said it focused in the second quarter on integrating recent acquisitions. Developmentally, Wishpond said it’s on track to implement a number of product and feature enhancements, including a new website builder, launched earlier this month.
Looking at the preliminary numbers, Leung said they’re coming in better than expected. He suggests that with Q2 revenues likely around $5 million, that would come ahead of his $4.7 million estimate as well as the consensus $4.8 million. Also, at about $5 million, WISH’s second quarter would represent about 55 per cent year-over-year revenue growth and 23 per cent growth sequentially.
In its press release, Wishpond also said that it had been the recipient of three new awards from research group Gartner, winning the Software Advice Front Runners award, being included in the Capterra shortlist for 2022 and winning the GetApp Category Leaders Award for content marketing, the last of these indicating that Wishpond’s platform is one of the most popular and highest-rated content marketing platforms available.
“We believe these awards highlight the robustness of the company’s integrated sales and marketing automation platform and its strong and growing reputation within the marketplace,” said Leung.
“Overall, we view [Wednesday’s] announcement as a bullish data point supporting our view that the company continues to outperform despite market uncertainty. We also believe the company remains well funded with our estimate of ~$2.8 million in cash and a $6 million unused facility,” he wrote.
Wishpond, which began trading on the TSX Venture in December of 2020, has been on a downward slide after an initial upward push. Year-to-date, the stock is down about 52 per cent and is down a similar 53 per cent for the past 12 months.
But Leung has confidence in a rebound in the share price, reiterating in his update a “Buy” rating and $2.25 target price, which at the time of publication represented a projected one-year return of 246 per cent.
Leung said WISH is currently trading at 1.2x EV/Sales compared to its peer group at 4.2x, while his target is based on 4.5x 2023 EV/Sales.
“We continue to view Wishpond as a compelling investment given its growing customer and recurring revenue base, strong and growing product portfolio and positive cash flowing operations,” he said.
Looking ahead, Leung is calling for full 2022 net revenue of $20.3 million and adjusted EBITDA of $0.2 million and for 2023 revenue of $25.4 million and EBITDA of $0.6 million.
Last month, Wishpond announced it would be continuing a share buyback, saying that the company’s Board believes that, at times, the market has been undervaluing its shares. Wishpond said over the course of the 12 months between June 20, 2022 and one year later, it may purchase up to five per cent of its shares, representing up to approx. 2.6 million shares.
“Depending upon future price movements and other factors, the Board believes that the purchase of the Shares would be a desirable use of corporate funds in the best interests of the Company and its shareholders. Furthermore, the purchases are expected to benefit all persons who continue to hold Shares by increasing their equity interest in the Company if the repurchased Shares are cancelled,” Wishpond said in a press release.
Disclosure: Wishpond Technologies is an annual sponsor of Cantech Letter.