Looking for a double with a US$30.00 target. GLTA
NUVEI CORP.
Q3 And Q4 Visibility Confirms FactSet Consensus Is Achievable
Our Conclusion
On September 29, Nuvei participated in CIBC’s Montreal Technology
Investor Tour. Philip Fayer, Nuvei’s Founder, Chair and CEO, participated in
a candid fireside chat that confirms Nuvei shares are attractive.
Fayer confirmed that the company has sufficient visibility and momentum
with existing business to meet its more realistic targets. Despite this, Nuvei’s
valuation multiples have overcorrected to reflect greater business execution
challenges, including the perception of a heightened competitive
environment that for Nuvei has been in place for several years. Fayer
indicated Nuvei continues to win share with modular platform advantages like
instant global payout and omni-channel payments on its global platform. We
view the recent decline as an opportunity to buy the company’s shares as the
share price currently implies the company won’t achieve its guidance.
In our view, Nuvei’s Q3 and Q4 guidance is achievable and conservative as
it accounts for the lost customer and delayed onboarding of new customers.
Additionally, the 2024 outlook (~17% FactSet consensus revenue growth) is
achievable. The company will benefit from growth market exposure, its
competitive offering, and its awarded business that has moved from 2023 to
2024 (~$100MM). Web traffic for the aggregate group of Nuvei merchants
we track is up 14% so far into Q3/23 (vs. 8% LQ). Strong trends in July and
August are offsetting weak September data (SimilarWeb).
Our $30 price target is based on 11x EV/F2024E EBITDA (primary valuation
method) and 4x EV/F2024E Sales (secondary). Nuvei’s growth and margins
compared to peers support this valuation.
Key Points
Our forecast is unchanged and aligned with FactSet for Q3 and Q4 in 2023,
and for 2024 forecasts 15% Y/Y revenue growth (FactSet 16.5%). Our web
traffic analysis of customers is in line with our forecast for H2/23. 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: We forecast organic revenue growth of 11% in
2023 and 15% in 2024. Channel trends ex. digital assets in Core (56% of
revenue, 34% Y/Y organic growth) and Emerging (17%, +13%) offset Legacy
(26%, -5%). They also support the ability to reach the revised medium
growth target of 15% – 20%. Our FCF margin forecast is ~16% in 2023 and
20% 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) focus on debt repayment
with FCF; 3) acquisitions.