Wishpond Technologies is a clear double, says iA Capital

A recent acquisition is a win-win for Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH), according to iA Capital Markets analyst Neehal Upadhyaya, who provided an update to clients on Tuesday. Upadhyaya thinks Wishpond should be able to crank up its average revenue per user (ARPU) through the onboarding of acquisition Viral Loops while at the same time attract more customers to its product suite.

Vancouver-based Wishpond, which has an “all-in-one” marketing platform for SMBs and currently serves over 4,000 customers across a number of industries, announced on Monday the completion of its integration of referral marketing solutions company Viral Loops, acquired in April for a total purchase price of about US$2.3 million. Wishpond said Viral Loops’ products are now on offer to its customers, integrating contacts and data between Viral Loops and Wishpond, with Viral Loops’ over 800 customers now having access to Wishpond’s platform while Wishpond customers can now use Viral Loops’ referrals solutions.

“Integrating Viral Loops with Wishpond has been an incredibly exciting opportunity for us. Our ability to offer Viral Loops to our clients has been extremely valuable, as the platform offers a perfect synergy with Wishpond’s existing solutions,” said Wishpond Chairman and CEO Ali Tajskandar in a press release.

Looking at the operational integration, Upadhyaya said the combination should help Viral Loops in attracting customers who want a referral marketing tool but aren’t willing to use a standalone product. Overall, Upadhyaya sees the impact of the completed integration as a positive for Wishpond.

“Once integrated, one of the immediate benefits WISH’s acquisitions see is how impactful WISH’s outbound sales engine is, a topic we covered in our initiation report. Historically, Viral Loops has relied on inbound traffic to acquire new customers, but through pairing the robust inbound sales growth with WISH’s outbound sales engine and adopting proven sales practices for lead prospecting, sales development and sales pipeline management, Viral Loops has experienced increased revenue and customer growth since it was acquired by WISH in April,” Upadhyaya wrote in his report.

On the strength of the new pairing, Upadhyaya pointed out that a financials services company successfully launched a new fintech mobile in the US market through Viral Loops and has generated 30 per cent growth through referrals from early adopters.

Upadhyaya said he expects an increase in inbound conversion rates for Viral Loops through joining forces with Wishpond.

“With WISH now offering Viral Loops to its own customer base and its own solutions to Viral Loops’ customer base, the Company should be able to increase its ARPU and gain additional customers for WISH’s other products. This further lends credence to our investment thesis that the Company’s comprehensive suite of products will allow it to become a more essential part of its customer’s marketing strategy leading to increased stickiness and reduced churn,” Upadhyaya said.

Wishpond’s share price has mostly been stuck in sub-$0.80 territory over the past few months, but Upadhyaya sees upside from here. With his report, the analyst reiterated a “Buy” rating on WISH and $1.50 target price, which at press time represented a projected one-year return of 108 per cent.

iA Capital initiated coverage of Wishpond on September 29, saying the company’s all-in-one marketing solution resonates with small and midsized businesses in a marketing environment that currently offers fragmented solutions where SMBs often come without in-house marketing resources and are increasingly looking to external, easy-to-employ solutions.

Upadhyaya sees a clear growth trajectory for WISH, with his estimates projecting full 2022 revenue and adjusted EBITDA of $21 million and negative $0.2 million, respectively, compared to 2021’s revenue and EBITDA of $15 million and $0.1 million, respectively. For 2023, the analyst is calling for revenue and EBITDA of $28 million and $1.0 million, respectively. Upadhyaya said WISH is currently trading at around 1.1x his 2023 EV/Revenue estimate, which is below its Canadian SaaS peers at 5.4x, its North American Marketing peers at 4.4x and its overall peer group average at 5.2x.

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