Wishpond is a “compelling investment opportunity”, says Beacon Securities

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It’s steady as she goes for Wishpond Technologies (Wishpond Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WISH), according to Beacon Securities analyst Gabriel Leung, who commented on the company’s recent quarter in an update to clients on Thursday.

Wishpond Technologies came flying out of the gate after an RTO brought it into the public realm in December, vaulting from $0.75 a share to the $2.50 mark in short order. But aside from a few blips, WISH has been sliding for much of 2021, leaving investors wondering what’s next for the digital marketing solutions company.

Lots of upside is the call from Leung, who reiterated his “Buy” rating and $3.50 per share target price after a look at the company’s fourth quarter 2020 results, delivered on Thursday.

“Aside from valuation, we believe Wishpond remains a compelling investment opportunity given the positive secular growth trends underlying the e-commerce industry, the company’s strong organic growth trends (~organic sales growth north of 35 per cent year-over-year), cash flow positive operations, along with its strong M&A funnel,” Leung wrote in his report.

Founded in 2009, Vancouver-based Wishpond, which offers an all-in-one suite of products to aid companies in marketing, promotion, lead generation and sales conversion, had Q4 revenue of $2.3 million, up 38 per cent year-over-year, and adjusted EBITDA of $121,151 compared to an EBITDA loss of $8,747 a year earlier.

For the 2020 year, revenue came in at $7.9 million compared to $6.1 million in 2019, with full 2020 adjusted EBITDA of $494,902 comparing with $103,477 in 2019. Cash from operations for the year came in at $3.2 million compared to $419,090 for 2019, while the company ended 2020 with about $7.3 million in cash and no long-term debt.

The Wishpond story in 2020 included in the fourth quarter a brokered private placement in October for gross proceeds of $4.6 million, the conversion of $4.66 million in debt to common shares as part of its qualifying transaction and the company’s listing on the TSX’s junior board on December 11.

“2020 was a monumental year for Wishpond, as we accomplished record financial results and commenced trading on the TSX Venture Exchange. This represents the beginning of our journey as a publicly traded company with very ambitious plans to grow both organically and inorganically through strategic acquisitions, with the goal of expanding our product offerings and opening new markets and verticals,” said CEO and chairman Ali Tajskander in the Q4 press release.

Business highlights in the new year include the acquisition of marketing tech and services company Invigo for about $3 million, a bought deal for gross proceeds of $8.05 million, the acquisition of PersistIQ for about $3 million and the launch of new product offerings Payments Product, Funnels Product and Outbound Sales.

Looking at 2020, management said the Q1 should see monthly recurring revenue of over $1.0 million and overall revenue year-over-year revenue growth, along with increased operating spend due to the larger headcount in sales and R&D.

“We are very optimistic of our outlook for the remainder of 2021,” said Juan Leal, Wishpond CFO in the press release. “We have a very strong balance sheet with cash balance currently exceeding $10 million to execute on our disciplined acquisition strategy. We are expecting to achieve record revenue growth in 2021.”

On the Q4 numbers, Leung had called for revenue and EBITDA of $2.2 million and $43,000, respectively, versus the realized $2.25 million and $121,000, respectively. Leung noted that WISH ended the quarter with 12 account executives but is currently at 18, with aspirations to grow to 25 by the end of 2021. With the Invigo and PersistIQ additions, the company is moving from about 120 employees to about 170.

“Looking into CY21, we believe the company’s growth initiatives will revolve around integrating its recent acquisitions (along with accelerating cross-selling efforts), bulking up its direct sales team to drive strong organic growth and M&A to drive inorganic growth,” Leung wrote.

“We believe M&A targets will include technology companies that augment Wishpond’s current sales and marketing automation platform, along with marketing agencies that bring with it a large customer base, which WIshpond can upsell into,” he said.

With the update, Leung has estimated WISH’s 2021 revenue and EBITDA at $14.0 million and $0.1 million, respectively, and 2022 revenue and EBITDA at $18.7 million and $1.5 million, respectively.

Leung’s maintained target of $3.50 stems from a 10x multiple of his 2022 EV/Sales estimates and represented at the time of publication a projected 12-month return of 107 per cent.

“From a valuation standpoint, we believe Wishpond continues to trade at a very healthy relative discount of 4.5x forward sales versus the peer group at over 10x,” Leung said.

Disclosure: Wishpond is an annual sponsor of Cantech Letter