These are USD targets. GLTA
NUVEI CORP.
Q3 Benefits From New Customer Adds And Share Gains
Our Conclusion
Nuvei’s Q3 results and Q4 outlook were in line on revenue while EBITDA
came in better than expected (4% above FactSet). Q3 constant currency
organic growth was encouraging at 13% (vs. 9% in Q2). Nuvei benefitted
from new customer adds (e.g., Temu, Cupshe, Caesars Entertainment) and
market share gains in value added payments technology beyond
commoditized processing from peers like PayPal. In our view, Nuvei’s Q4
guidance is achievable as it accounts for the lost customer and delayed
onboarding of new customers. We also view 2024 forecasts to be within
reach (FactSet at 16% revenue growth and FCF margins ~20%). Despite
this, the broader market may require further supporting evidence. Questions
surrounding the 2024 outlook create an opportunity for investors. At 7.6x
EV/2024E EBITDA (FactSet), Nuvei’s shares are undervalued and attractive.
Our $34 price target (prior $30) is based on 11x EV/2024E EBITDA (primary
valuation method) and 4x EV/2024E Sales (secondary). Nuvei’s growth and
margins compared to peers support this valuation.
Key Points
In Q3, revenue was $304.9MM (vs. FactSet $303.2MM) and adjusted
EBTIDA was $110.7MM (vs. $106.5MM). The Q4 outlook at the midpoint
(revenue of $317MM and EBITDA of $115MM) was slightly higher than
FactSet (revenue of $315MM and EBITDA of $111MM). Our 2024 forecast
of 18% Y/Y revenue growth is also closely aligned (FactSet at 16%).
The Q3 results and better business plan execution demonstrates that Nuvei
is positioned to benefit from its exposure to growth markets, its competitive
offering, and ~$100MM in awarded business that has slipped from 2023 to
2024. These have manifested with new customers and market share gains
within travel, retail, and gaming, which places Nuvei in a better position to
execute against its business plan and targets for revenue growth (medium
term at 15% – 20%) and EBITDA margins (long term at 50%+). Our Nuvei
thesis is based on three points:
1. Leader In Growth Market Of Integrated Payments: Global payments
volume is ~$50T (Nuvei). In 2023, we expect Nuvei’s volume to reach
~$200B, leaving white space to add new customers and grow wallet share.
2. Growth And Cash Flow: Positive channel trends in Global Commerce
(56% of revenue, +25% Y/Y organic growth) and in B2B, government & ISVs
(18%, +16%) offset lower demand from SMBs (26%, -4%). Together, they
support Nuvei achieving its medium growth target of 15% – 20% and our
FCF margin forecast of 17% in 2023 and 21% in 2024 (calculated as CFO –
PP&E – intangibles).
3. Multiple Upside Areas: 1) Growth verticals with new customers in
iGaming, online retail, unified e-commerce, online travel, online digital and
social games that total over 50% of revenue; 2) debt repayment with FCF; 3)
acquisitions.