CIBCEQUITY RESEARCH
March 2, 2022 Company Update
NUVEI CORP.
Q4 Preview: Expect A Strong Quarter And 2022 Outlook
Our Conclusion
Nuvei will report its Q4 before the market open on March 8. We expect our
forecasts for Q4, Q1, and 2022 will be achieved. Year-on-year web traffic
growth in Q4 of 29% and 21% so far into 2022 is directionally consistent with our forecast and the company’s targets (SimilarWeb). Nuvei’s target calls for 30% annual volume and revenue growth for the medium term, and EBITDA margins of 50%+ in the long term. Recall that in Q3, organic volume and revenue growth was 54% Y/Y and EBITDA margins were ~44%. While the company’s stock price has yet to recover from the December short report, in our view, Nuvei is well positioned to benefit from the opportunities in its core markets. We believe its shares are attractive and should be purchased. We reiterate our Outperformer rating and price target of US$76 (~C$97). Our price target is based on a blended valuation of 20x our EV/F2023 EBITDA forecast of $537MM (primary method) and 10x our EV/F2023 sales forecast of $1,207MM (secondary).
Key Points
We expect Q4 revenue of $209MM (FactSet $209MM) and adjusted EBITDA of $89.4MM (FactSet $88.5MM). Our adjusted EPS forecast is $0.45 (FactSet $0.45). Since its IPO in September of 2020, Nuvei has, on average, beat revenue expectations by 6% and by 9% for EBITDA. The following day, on average, its share price rose by 7%. Last quarter, the revenue beat was 2.7% and the share price fell by 3.5%. We expect a beat will be more favorably received given the material sell-off in technology and the payments space, including Nuvei. We affirm our positive Nuvei investment thesis based on three points:
1. Leader In Growth Market Of Integrated Payments: Global e-commerce
is a ~$4 trillion market that is forecast to grow annually at ~13% to 2024 with complex integrated processing requirements (eMarketer). The volume trends appear sustainable and consistent with the secular growth trend.
2. High Growth, Margins, And Cash Flow: From 2022 to 2023, we
conservatively forecast ~30% organic revenue growth and free cash flow
margins of ~33%. We expect growth from new customers, including
enterprise, and wallet expansion, with existing customers buying end-to-end payments solutions.
3. Multiple Upside Opportunities For Revenue Growth: These include 1)
e-commerce growth; 2) growth verticals in which Nuvei has a strong position, such as U.S. regulated gaming and sports betting, online marketplaces, FX trading, social gaming, SaaS, and Crypto; and 3) incremental acquisitions. Any or all could materialize, and contribute upside to our conservative forecast