Nuvei is a Buy on the pullback, says National Bank

Solid quarterly results and clear growth trajectory should be keeping investors interested in Nuvei Corp (Nuvei Corp Stock Quote, Charts, News, Analysts, Financials NASDAQ:NVEI), according to National Bank Financial analyst Richard Tse, who updated on the company on Wednesday.

Canadian payments company Nuvei released its first quarter 2023 financials on Wednesday, with total transaction volume up 45 per cent year-over-year to $42.4 billion and revenue up 20 per cent to $256.5 million. The company’s net loss for the quarter was $8.3 million compared to net income of $4.5 million a year earlier.

“Nuvei is off to a strong start in 2023, delivering first quarter results ahead of our financial outlook, as we execute on our strategic initiatives, grow our market share, drive innovation, and extend our geographic reach,“ said Philip Fayer, Nuvei Chair and CEO, in a statement.

The market seemingly reacted negatively on Wednesday, dropping the stock about 14 per cent in trading. But Tse thinks that’s an overreaction.

“The issue came from Management’s conference call comments with respect to Q2 guidance. While the Company raised its full-year outlook, Management noted it would see a dip in Q2 before growth reaccelerates in the back half of this year,” Tse wrote.

“Given the obvious scrutiny around this name, that perceived hesitation for a name that’s had a consistent trajectory in a potentially slowing economy is what’s driving the violent sell off today. The way we see it, based on our read of the results and our outlook, suggests an opportunity,” he said.

Looking at the numbers, Tse said the $256.5 million topline compared to his estimate at $255.5 million and the consensus at $252.5 million, while adjusted EBITDA at $96.3 million was a little above his call at $93.6 million and the Street at $94.2 million.

Takeaways from the quarter for Tse included strong gross payments volume, up 45 per cent year-over-year and strong merchant transaction and process services revenue at $255 million, up 20 per cent from a year earlier, and management’s held guidance which implied a 49 per cent year-over-year growth at the midpoint.

“We continue to believe Nuvei is uniquely positioned for growth in a market that’s undergoing a meaningful transformation care of the rise in digital services. Within that market, Nuvei remains a disruptive player with outsized growth relative to the sector,” Tse wrote.

With the update, Tse reiterated an “Outperform” rating and US$75.00 target price, which translated at press time to a one-year projected return of 126 per cent.