Wishpond Technologies gets a Buy rating from PI Financial
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A strong organic growth profile paired with a solid M&A track record makes marketing platform Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH) a dream come true, according to PI Financial analyst Kris Thompson, who launched coverage of the company and stock on Wednesday with a “Buy” rating and $2.75 target.
Vancouver-headquartered Wishpond provides marketing-focused business solutions geared primarily at the small business market. The company’s all-in-one platform has software modules to help businesses develop their online presence including enhancing websites, running promotional, running email marketing and sales campaigns, generating analytics and SMS marketing.
Founded in 2009 and working from its current business model since 2015, Wishpond went public by reverse takeover of shell company Antera Ventures in December 2020 with a concurrent equity raise of $4.6 million at $0.75 per share.
Thompson said Wishpond has generated organic growth of over 30 per cent since 2017 from its subscription-based solutions and should continue with this rate over his forecast period of 2022 and 2023.
“WISH spent a number of years investing in a sustainable sales process and now has a well-established sales generation engine for systematic lead generation and conversion,” Thompson wrote in his coverage initiation.
“WISH doubled its quota-carrying headcount to 25 in the first year since going public in December 2020, and expects to nearly double this group again in 2022. The Company is also launching a number of new products, arming its salesforce with the ammunition required to up-sell its installed base, and to add new customers,” he said.
By industry, Wishpond’s customers come from e-commerce (~25 per cent), B2B (~24 per cent and Food & Beverage (~16 per cent), with Agencies, Not-for-Profit and Education, Services, Art & Design and Health & Wellness making up smaller fractions.
Thompson noted that the past 12 months has seen WISH launch a number of product initiatives, including a Payments product, a lead profiling and upselling product (Funnels), an Outbound Sales Solution, an Appointments product, a Zoom integration and, in January, a new email marketing platform with enhancements such as a new user-friendly interface, the ability to preview email text, support for Accelerated Mobile Pages (AMP) and a new email API.
“We expect that product enhancements will continue to be a feature in 2022, helping to drive organic revenue growth and minimize customer churn,” Thompson wrote.
On the acquisition front, Wishpond has made four acquisitions since its go-public in December 2020: Invigo, a marketing technology and services company focused on medical clinics across North America; PersistIQ, a sales automation software company for B2B small business owners and consisting of outbound sales, communications and workflow management; Brax.io, an advertising management platform; and WinBack, an SMS e-commerce marketing solutions platform for small- and medium-sized businesses with a specialization in cart abandonment technology to Shopify merchants.
Thompson commented that Wishpond management seems highly disciplined in its M&A approach and targeting companies with strong recurring revenue, a similar margin profile and, ideally, profitable.
“As of Q3/21, WISH had a strong balance sheet with ~$8 million in cash as well as a $6 million undrawn revolving operating facility giving it plenty of firepower to execute on deals. With a robust pipeline and near-term focus on acquiring complementary tech platforms, we expect WISH to execute a similar number of deals in 2022 as it did the previous year,” Thompson wrote.
As for Wishpond’s market, Thompson quoted a 2021 CMO Survey that marketing spend has returned to normal levels after a drop earlier in the pandemic but that the next 12 months should set a record for highest growth rates seen in a decade, with digital marketing activities featuring prominently. To show the rise in dominance of online commerce and marketing, Thompson said 58 per cent of marketing budgets are now spent on digital marketing activities, which are expected to grow by 14.7 per cent over the next year.
On the space itself, Thompson said the digital marketing software industry is highly fragmented, with hundreds of companies specializing in specific lead generation tools, but whereas many vendors have a narrow focus on a particular tool, Wishpond offers a complete portfolio of solutions. That gives Wishpond an edge, he said.
“Hubspot, for example, is a prominent player in the marketing automation space and would be considered one of WISH’s primary competitors in that silo, whereas Mailchimp would be viewed similarly within the email marketing segment. Yet, the larger market is sprinkled with marketing tools that work in silos and don’t seem to offer a complete marketing solution like that of WISH where all aspects of a campaign are offered from within the same platform and under a single subscription,” he said.
By the numbers, Thompson is calling for Wishpond to deliver full 2021 revenue and EBITDA of $14.6 million and negative $183,000, respectively, 2022 revenue and EBITDA of $22.3 million and $1.1 million, respectively, and 2023 revenue and EBITDA of $29.1 million and $2.9 million, respectively. The analyst’s DCF valuation generates the $2.75 target, which at the time of publication represented a projected 12-month return of 159.4 per cent.
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