Is Pivotree still a buy?

In a March 26 note, Paradigm Capital analyst Daniel Rosenberg maintained his “Buy” rating and $2.50 target on Pivotree (Pivotree Stock Quote, Chart, News, Analysts, Financials TSXV:PVT), saying the company’s technology remains compelling but the shift to its newer business mix will take time to scale.

Rosenberg said Pivotree is moving through its transition with a right-sized cost base and sustainable cash generation, even as legacy churn continues to weigh on reported growth. He said the company is investing in differentiated products and services for enterprise-scale commerce, with exposure to commerce, data and AI trends and longer-term upside potential through M&A.

Fourth-quarter results, he said, showed continued bottom-line resilience. Revenue came in at $14.9-million, down 18.4% year over year and slightly below the $15.4-million consensus estimate. Legacy Managed Services revenue fell 52% to $2.1-million, Professional Services declined 17% to $8.6-million, and Managed IP Solutions revenue rose 22% to $4.1-million, driven by AI-enabled SKU build solutions. Gross profit was $6.8-million, for a 46% gross margin, up from 44.0% a year earlier, while Adjusted EBITDA was $1.2-million versus consensus of $1.6-million.

Rosenberg said Managed IP Solutions overtook Legacy Managed Services exiting 2025 and is expected to become the company’s main growth driver. He also noted Pivotree doubled new-logo growth in 2025 from the prior year, supported by customer interest in AI-enabled MIPS offerings.

“We continue to see interesting tech at Pivotree, but the transition to the new business will take time to scale,” he said. “Pivotree is entering 2026 with a right-sized cost base with sustainable cash generation. Management is finding its footing with the new MIPS business; however, a return to overall growth still needs time.”

Bookings declined 22% year over year to $14.2-million, largely due to a 73% drop in LMS bookings as the company shifted focus toward newer solutions. MIPS bookings improved to $4.6-million from $2.2-million in the prior quarter, and Rosenberg highlighted a trailing-12-month MIPS book-to-bill ratio of about 1.01x as evidence of a gradual shift toward higher-quality revenue.

Pivotree ended the quarter with net cash of $12.8-million, up from $11.8-million in the previous quarter, and remained debt-free. The company also has access to an undrawn $8.0-million credit facility. Cash from operations was $1.7-million in the quarter, improving from a loss of $1.2-million a year earlier, while full-year cash from operations rose to $9.1-million from a loss of $3.8-million in 2024.

Rosenberg also pointed to Pivotree’s May sale of its warehouse management solutions assets to Tecsys for C$2.7-million, saying the divestiture allows the company to redirect resources toward Control Tower and SKU Build, which it sees as key growth priorities. Management, he added, views AI-powered SKU build as a “land grab” opportunity and reiterated 2026 guidance for EBITDA margins of seven to 10 per cent and positive cash flow, with revenue declines expected to trough this year.

Rosenberg said Pivotree should generate $3.1-million in Adjusted EBITDA on revenue of $56.3-million in fiscal 2026, improving to $5.1-million in Adjusted EBITDA on revenue of $62.5-million in fiscal 2027. He said the shares trade at 0.5x 2026 EV/Sales versus peers at 2.2x, and that his $2.50 target is based on a blended valuation using EV/Sales and DCF.

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