Wishpond Technologies to hit $2.50 per share, says Paradigm

Look for Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH) to make a splash with its second quarter report due on Wednesday. That’s the scoop from Paradigm Capital analyst Daniel Rosenberg who previewed the quarter in a recent update to clients, saying Wishpond’s Q2 revenue will showcase strong year-over-year growth.

Vancouver-based Wishpond provides SaaS-based marketing tech for small and mid-sized businesses (SMBs), with a full platform of solutions for digital sales and marketing. Founded in 2009, the company began trading on the TSX Venture Exchange in December, 2020, whereupon it shot up like a rocket and doubled in value in a matter of weeks. Since then the path has been a downward one, with WISH going from a high of $2.53 per share on December 29, 2020, to the $0.60-$0.80 range in which it has been trading over the past few months.

But Rosenberg sees a lot of upside to the stock from here, reiterating in his August 22 report a “Buy” rating and 12-month target of $2.50 per share, which at the time of publication represented a projected return of 228.9 per cent.

“Wishpond’s ability to deliver value to an under-served segment of businesses has led to strong growth and retention numbers. The company is growing rapidly at ~30 per cent per year with industry-leading retention and an attractive cost structure. We see a meaningful opportunity for Wishpond to exploit a gap in the market as smaller businesses look to Wishpond to provide a holistic marketing solution at a very attractive price point,” Rosenberg wrote.

Rosenberg said he’s not expecting any surprises in the Q2 financials, as the company delivered a business update last month where it said revenues are likely to be a quarterly record, surpassing the $4.7 million previously attained in Q4 2021 and with an annualized revenue run-rate of over $20 million, which would represent the first time the company hit that mark in its history.

Rosenberg is calling for $4.8 million in revenue for the quarter, represeting a 44 per cent year-over-year improvement, driven by about 25 per cent organic growth. On earnings, he is calling for an adjusted EBITDA loss of $0.2 million with a gross profit of $3.1 million, representing a 65 per cent margin.

“The risks around a slowdown in SMB spending has not impacted Wishpond to date, with the company noting higher monthly recurring revenue in April, May and June. In addition, Wishpond operates under a SaaS-based business model rather than a per-campaign spending model, making its offering more resilient in the event of a reduction in marketing activity,” Rosenberg wrote.

Looking ahead, Rosenberg said WISH’s sales pipeline remains robust and he noted the company’s recent operational initiatives to shave off costs, likely to result in more than $1.0 million in savings over the next 12 months. Wishpond is also ramping up its sales team, Rosenberg said, which should help push revenue over that $20 million mark. 

By the numbers, Rosenberg is calling for 2022 revenue and adjusted EBITDA of $21.0 million and $0.7 million, respectively, and for 2023 revenue and adjusted EBITDA of $29.5 million and $2.1 million, respectively.

On valuation, Rosenberg has WISH pegged currently trading at 1.2x EV/Sales for 2023, which he deems to be attractive. The analyst’s $2.50 target stems from a 4.5x EV/Sales for 2023 multiple, which compares to WISH’s CRM and marketing software and small-cap Canadian tech peers at 4.0x.

“We believe long-term trends will be supportive of increasing the use of digital services within SMBs and Wishpond has an opportunity to establish itself as a dominant player in marketing technology in the long term. We reiterate our Buy recommendation,” Rosenberg said.

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