Wishpond is a compelling investment, says iA Capital

Canadian marketing tech company Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH) continues to deliver excellent quarterly performances, according to iA Capital Markets analyst Neehal Upadhyaya, who provided an update to clients on Friday where he reiterated a “Buy” rating on the stock.

Wishpond, which has an all-in-one marketing platform primarily serving the small- and medium-sized business sector across a range of industries, reported its first quarter financials on Thursday. The company posted a 38 per cent year-over-year increase in revenue to $5.6 million and positive adjusted EBITDA at $209K compared to negative $441K a year earlier. Wishpond ended the quarter with $1.9 million in cash and no debt.

“Management continues to have a positive outlook for Wishpond in 2023. The Company has not  felt material negative impacts due to interest rate and inflationary trends, supply chain, or other macroeconomic effects. Wishpond’s performance is highly positive across all its businesses, with robust demand for its products,” Wishpond said in a press release.

The Q1 top and bottom numbers were ahead of estimates, according to Upadhyaya, who said the $5.6 million in revenue was above his call and the consensus forecast both at $5.5 million, while the $0.2 million in EBITDA beat Upadhyaya’s call and the consensus at $0.1 million. 

Upadhyaya said the EBITDA beat came from better-than-expected gross margins, which the analyst said are likely to continue improving as Wishpond’s revenue mix moves towards customers using the fully integrated Propel IQ platform as opposed to legacy customers using standalone solutions.

At the same time, he said there’s likely to be softer growth in the second quarter, as the company has been retraining staff on Propel IQ, recently launched. Upadhyaya said Wishpond is looking to increase its sales team, which should also increase its overall sales and marketing spend.

“The Company’s sales team will have less time to transact with prospective customers, resulting in softer Q2 growth compared to 2022. However, on a year-over-year and quarter-on-quarter basis, we still expect the Company to grow at 17 per cent and 5 per cent, respectively. We note that the softness in the quarter does not impact the rest of the year, and we expect the Company to achieve annual top-line growth of 30-40 per cent, with the majority of that coming from H2/23,” Upadhyaya wrote.

With the update and reiterated “Buy” rating, Upadhyaya maintained a 12-month target of $1.75 per share, which at press time represented a projected return of 191.7 per cent.

“Wishpond is trading at just 0.9x our 2024 revenue estimate compared to its Canadian SaaS comps trading at 5.9x and its North American marketing peers at 5.8x. Looking at EV/EBITDA, the Company trades at just 10.3x our 2024 EBITDA estimate, well below its overall peer group at 32.8x, despite providing a growth profile that ranks in the top three amongst its peers. We believe the current risk-to-reward ratio is compelling,” he said.

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