iA Capital Markets analyst Neehal Upadhyaya has reiterated a Top Pick status for Canadian marketing tech company Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH), saying in a Wednesday report to clients that despite recent strong quarterly performances, Wishpond isn’t getting the recognition it deserves.
Vancouver-based Wishpond, which has an all-in-one marketing platform for the small to medium-sized business (SMB) market, saw its share price shoot up after its RTO entry as a publicly-traded company in 2020, but the stock has trailed off since. WISH started 2023 at $0.70 per share and has mostly stayed in the $0.60-$0.80 range over the first half of the year.
But Upadhyaya sees lots of upside from here, maintaining both a “Buy” rating on WISH and $1.75 target price, good at the time of publication for a projected one-year return of 173 per cent.
Upadhyaya said Wishpond is at a pivotal junction in its story, where the company has integrated a number of acquisitions into one functioning platform, Propel IQ, which has helped the company delivered year-over-year revenue growth of over 38 per cent for its first quarter 2023 and should result in stronger retention rates, an increase in average revenue per user and also help the company target larger SMB customers with its comprehensive marketing solution, according to Upadhyaya.
“Through Propel IQ, WISH can offer its customers a cheaper alternative to their in-house marketing teams or hiring marketing help through agencies, allowing it to continue achieving 30 per cent-plus year-over-year growth whilst generating positive Adj. EBITDA and free cash flow,” he wrote.
“The Company is looking to strengthen its offering by using AI to offer its customers an easier way to implement their marketing strategies. We believe this will also increase retention rates as users will see value in the simplicity yet effectiveness of the Company’s product suite,” he said.
On valuation, Upadhyaya estimated WISH to be currently trading at 0.9x 2024 EV/Revenue, which is well below its peer group average at 6.1x. On EV/adjusted EBITDA, the stock is trading at 11.0x 2024 numbers, again, well below the group average at 34.2x — and that’s coming with WISH’s “superior” growth profile of about 30 per cent, the analyst said, compared to its peer group average of about 20 per cent.
“With management executing as evidenced by past quarterly results, we believe the Company offers investors a compelling risk-to-reward ratio at these levels despite increased macroeconomic risk faced by SMBs in general,” he said.
By the numbers, Upadhyaya is calling for Wishpond’s revenue to go from $20 million in 2022 to $27 million in 2023 and to $35 million in 2024, while adjusted EBITDA is expected to go from $0.6 million in 2022 to $1.8 million in 2023 and to $2.8 million in 2024.
Disclosure: Wishpond Technologies is an annual sponsor of Cantech Letter.