QUIS stock is still a buy, Eight Capital says

Following the company’s second quarter results, Eight Capital analyst Christian Sgro remains bullish on Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Chart, News, Analysts, Financials TSXV:QUIS), if only a little less so.

On August 28, QUIS reported its Q2, 2023 results. The company posted EBITDA of $4.4-million on revenue of $45.3-million, down 37 per cent and five per cent, respectively, over the same period last year.

“The second quarter was pivotal as we not only achieved key milestones on important initiatives, but also undertook necessary actions, including cost reductions at the end of July to mitigate the impact of macroeconomic challenges while propelling critical business objectives,” CEO Mike Reinhart said. “Highlighted by the seamless transition of AgeChecker.Net to PayiQ’s processing platform, our payment solutions segment continues to show promise as we attain key milestones in PayiQ’s commercialization and affirm the effectiveness of our long-term market penetration strategy. Recent economic signals are supporting increased investments in digital transformation initiatives, and our global cloud solutions business has stayed resilient, strategically positioning us advantageously. Our symbiotic relationship with Microsoft will provide our teams with a competitive advantage in the AI, managed services, security and health care market sectors. This relationship also facilitates harmonized sales and marketing activities that expedite customer acquisition and propel future revenue. We are committed to maintaining our status as a premier solution provider in the digital transformation and related services ecosystem while pursuing further growth and innovation in the payments arena.”

Sgro provided his take on the quarter.

“Quisitive reported results below consensus estimates, as weakness in Cloud demand pushed out deals and pressured margins. Management provided guidance ranges for H2/23, showing confidence in near-term visibility as deals cross the finish line,” he said. “The Payments segment remains an important area of
diversification, as PayiQ makes progress toward broader adoption. Despite our reduced estimates, we continue to see value in Quisitive shares as the company pushes through macroeconomic headwinds and maintains positive cash flow.”

In a research update to clients August 29, the analyst maintained his “Buy” rating on QUIS but trimmed his price target from $1.50 to $1.25.

Sgro now thinks Quisitive will post Adjusted EBITDA of $26.3-million on revenue of $187.7-million in fiscal 2023. He expects those numbers will improve to EBITDA of $34.1-million on a topline of $207.9-million the following year.

“Quisitive currently trades at 4.8x compared to cloud and payments peers at 10.5x and 12.3x, respectively,” the analyst concluded. “Of note, our target price calculation considers the impact of all near-term cash/equity earn-outs. Key risks to our target include macroeconomic weakness or delays to sales cycles.”