Revised TargetsAll but Citi's are much higher than our current price. GLTA
Nuvei Corp.’s “solid momentum continues,” said RBC Dominion Securities analyst Paul Treiber following the release of better-than-anticipated fourth-quarter results and a raise to its 2022 guidance.
“Nuvei’s outlook appears conservative and assumes 30-35-per-cent organic growth (above medium-term more than 30-per-cent target), taking into account macroeconomic uncertainty and assumed 50% contraction in its crypto vertical,” he said in a research note.
TSX-listed shares of the Montreal-based global payment technology firm soared 13.6 per cent on Tuesday after it announced fourth-quarter 2021 revenue grew 83 per cent to US$212-million, above its guidance range (US$204-US$210-million) and exceeding both Mr. Treiber’s US$210-million forecast and the consensus estimate of US$209-million. Adjusted earnings per share of 47 US cents topped the 45-US-cent projection from both the analyst and the Street.
Nuvei also revealed better-than-anticipated 2022 guidance, including 30-35-per-cent year-over-year revenue growth (to US$940-US$980-million) and adjusted EBITDA gains of 28-34 per cent (to US$407-million-US$425-million). Both beat the Street’s expectations (US$943-million and US$412-million, respectively).
“The outlook appears conservative and achievable, considering the outlook: 1) incorporates macroeconomic uncertainty; 2) assumes 50-per-cent contraction in crypto-related revenue; 3) new disclosures show broad-based momentum in 2021; 4) cohort and net revenue retention suggests high visibility to near-term growth; and 5) Nuvei’s new customer pipeline ‘has never been stronger,’” he said.
“New disclosures validate Nuvei’s success with its land-and-expand strategy, new customer momentum, and importance of its APM value proposition. 2019 cohort customers expanded 38 per cent year-over-year FY21 and net revenue retention improved from 101 per cent FY20 to 146 per cent FY21. The 2021 cohort is 72-per-cent larger than 2020, implying strong new customer momentum. Modular Technology revenue rose 138 per cent FY21, showing differentiated software is driving momentum. APM transactions rose 285 per cent year-over-year FY21 and were 26 per cent of FY21 transactions, up from 12 per cent FY20.”
While he sees Nuvei’s current valuation as disconnected from its 30-per-cent organic growth, Mr. Treiber cut his target for its shares to US$100 from US$145 “given the material valuation multiple contraction in high-growth payment peers.” The average is US$104.75.
“Nuvei is trading at 13 times calendar 2023 estimated EV/EBITDA, which is below high-growth payment peers at 19 times , despite faster growth (32 per cent vs. 19 per cent),” said Mr. Treiber, keeping an “outperform” recommendation. “Valuation is also at the low-end of Nuvei’s historical range. We believe Nuvei’s discount to peers will narrow overtime, on greater awareness of Nuvei’s competitive advantages and the sustainability of Nuvei’s growth momentum.
“We believe Nuvei is well positioned to sustain more than 30-per-cent revenue growth. With Nuvei’s valuation below peers, we believe the stock is attractive.”
Other analysts making target adjustments include:
* Citi’s Ashwin Shirvaikar to US$63 from US$68 with a “neutral” rating.
“Nuvei provided incremental disclosure about its business mix, etc., – clearly a step in the right direction…this is info we have requested for some time though we believe the stock can benefit if the company provides this on an ongoing basis (e.g., at least the ability to back into organic growth quarterly and vertical info annually),” he said. “The quarter itself straddled consensus and our expectations – note we remain positive on robust volume trends for Nuvei. We agree with the need to make investments in technology and people but believe this is likely to be ongoing in nature given the competitive nature of the industry. This results in higher volumes but lower EBITDA in our forward model.”
* Scotia’s Paul Steep to US$74 from US$107 with a “sector outperform” rating.
“We expect Nuvei will continue to grow through a combination of organic and acquired initiatives and that the company’s primary focus will remain on expanding its client base in new and existing verticals,” he said. “We believe the firm will remain active in evaluating acquisitions that further enhance its product/service capabilities.”
* CIBC’s Todd Coupland to US$80 from US$76 with an “outperformer” rating.
* Credit Suisse’s Timothy Chiodo to US$95 from US$125 with an “outperform” rating.