Wishpond scores target increase from iA Capital

The good times keep rolling for Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH), despite the more challenging macro environment, and that’s a great sign of strength, according to iA Capital Markets analyst Neehal Upadhyaya, who reviewed Wishpond’s latest quarterly results in a Friday report.

“Wishpond finished the [2022] year with revenues of ~$20.5 million, representing a year-over-year increase of 39 per cent – mostly all organic,” Upadhyaya said. “The growth achieved by WISH was entirely funded through free cash flow from operations, and we expect the Company to continue realizing growth rates of ~30 per cent+ for the foreseeable future without tapping into its M&A strategy.”

Marketing platform company Wishpond primarily serves the small- to medium-sized business sector with its SaaS-based Propel IQ product, offering tools for marketing, promotion, lead generation, ad management, referral marketing, sales conversion and outbound sales automation. The company reported its fourth quarter and full 2022 financials on Thursday, coming in with record quarterly revenue of $5.9 million, up 27 per cent year-over-year, and record positive adjusted EBITDA of $0.7 million compared to $0.5 million a year earlier.

Wishpond finished the quarter and year with $3.0 million in cash and short-term investments and no debt. For the 2023 year, management said its goals include increasing monthly recurring revenue through organic and inorganic means, scaling up its sales team and remaining adjusted EBITDA positive.

“We continue to experience increasing demand for our products and have not witnessed any slowing down or negative impacts due to external macroeconomic conditions.  Wishpond remains in an extremely strong financial position with a clean balance sheet,” said Chairman and CEO Ali Tajskandar in a press release.

On the quarter, Upadhyaya said the $5.9 million topline was in-line with his estimate at the same but above the consensus forecast at $5.7 million, while adjusted EBITDA at $0.7 million was slightly ahead of his estimate at $0.6 million and well above the Street at $0.2 million. The analyst said the EBITDA beat was largely due to better-than-expected gross margins and lower-than-expected Sales and Marketing spend.

Upadhyaya is calling for Wishpond’s 2023 to finish with revenue at $27 million and then moving to $35 million for 2024, while adjusted EBITDA is forecasted to go from $0.6 million in 2022 to $1.7 million in 2023 and to $2.2 million in 2024.

With the update, Upadhyaya maintained a “Buy” recommendation but increased his target price to $1.75 per share (previously $1.50), which is now based on a 3.0x multiple of his 2024 revenue estimate. At press time, the new target represented a projected one-year return of 173.4 per cent.

Upadhyaya said WISH is currently trading at 0.9x his 2024 revenue estimate compared to its Canadian SaaS peers at 5.7x and its North American marketing peers at 5.5x.

On the M&A front, Upadhyaya noted that WISH management has been recently hitting the brakes on a historically active program, but that could change.

“With a $10 million unused credit facility and the ability to service debt through free cash flow generated from operations (~$800K in Q4/22), we expect management to re-target growth through inorganic means as they take advantage of falling valuations,” Upadhyaya wrote.

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