NVEI stock (TSX:NVEI) has target slashed by National Bank

Shares of Canadian fintech company Nuvei (Nuvei Stock Quote, Charts, News, Analysts, Financials NASDAQ:NVEI) fell hard after its latest earnings release. But fans of the stock should keep their eyes on the solid growth numbers in its core business, says analyst Richard Tse of National Bank Financial.

Tse looked over the quarter in a Wednesday report to clients where he maintained an “Outperform” rating on NVEI while lowering his target price from $50.00 to $27.00.

Nuvei, which has a payments platform for mobile commerce and e-commerce markets, reported its second quarter 2023 financials on Wednesday, with revenue rising 45 per cent year-over-year to $307.0 million and adjusted EBITDA improving by 19 per cent to $110.3 million.

“The quarter was notable for the number of new customer wins and growing pipeline across all regions, as well as wallet share expansion opportunities with existing customers, underscoring momentum in the business and laying the foundation for sustainable long-term growth,” said Philip Fayer, Nuvei Chair and CEO, in a press release. 

Nuvei stock fell a full 39 per cent in trading on Wednesday, with Tse saying underwhelming third quarter and full-year 2023 guidance. Tse called the Q2 numbers mixed, with the $307.0 million topline comparing to his estimate at $308.5 million and the consensus expectation at $305.9 million, while Adjusted EBITDA at $110.3 million was above Tse’s estimate at $108.8 million and the Street’s call at $107.4 million.

As for its guidance, Nuvei is forecasting Q3 2023 revenue at $300-$308 million and adjusted EBITDA at $105-$110 million, whereas Tse’s prior estimates were $316 million in revenue and $121 million in EBITDA and the consensus estimates were $314 million in revenue and $122 million in EBITDA.

For the full 2023 year, guidance was at $1,170-$1,195 million in revenue and $417-$432 million in Adjusted EBITDA compared to Tse’s projection of $1,244 million in revenue and $466 million in EBITDA and the Street’s estimates at $1,242 million in revenue and $468 million in EBITDA.

Despite the dimmer picture from management, Tse still liked what he saw from operations, where Global eCommerce sales showed solid growth of 34 per cent year-over-year in organic constant currency and its Emerging B2B, government and integrated payments channel segment showing revenue growth of 13 per cent.

“The strong growth rate in those core business segments combined with the Company’s re-rated valuation today (7.8x F24E EV/EBITDA versus a peer average of 14.1x) is why we’re maintaining our Outperform despite some obvious challenges but with a revised target of $27 (was $50) to reflect our revised DCF assumptions,” Tse wrote.

At the time of publication, Tse’s new $27 target represented a projected one-year return of 46.5 per cent.