Analysts at IA Capital Markets have selected Canadian technology firm Wishpond Technologies Ltd as one of its top picks in 4Q 2022.
Based in Vancouver, Wishpond provides marketing-focused online business solutions with an “all-in-one” marketing suite that provides companies with marketing, promotion, lead generation, and sales conversion capabilities from one integrated platform.
In a recent note, IA’s analysts drew comparisons between Wishpond and the much larger Lightspeed Commerce Inc, the $4 billion company that also offers a one-stop commerce platform for merchants.
READ: Wishpond Technologies achieves record revenue for 2Q as sales team expansion and new product introductions fuel growth
“We continue to believe that growth tech stories will no longer move the needle, and investors will favour businesses that show the ability to generate profitability and cash flow to help fund growth initiatives rather than companies that need to tap into the capital markets,” IA analysts wrote. “Companies with a strong balance sheet will be better positioned for future growth.”
Languishing technology valuations create opportunities for long-term investors, IA noted.
Wishpond fits into that opportunity for investors with a larger risk appetite, the analysts highlighted, calling the company “a name to be considered” in the small cap universe.
During its second quarter ended June 30, 2022, Wishpond delivered record revenue of $5.0 million, a 55% increase from a year ago, and returned to net positive cash from operating activities of $81,354 for the second quarter, compared to a loss of $801,512 in the same quarter a year ago.
“Similar to (Lightspeed), Wishpond benefits from a seasonally strong 4Q as small and medium businesses look to get ready for the holiday season by targeting consumers through their marketing strategies,” analysts wrote.
Bullish marketing outlook
Wishpond also stands to benefit from increased marketing budgets in 2022, IA noted.
According to a recent study from Gartner, three out of four chief marketing officers (CMOs) have increased budgets compared to last year, as spending has climbed to 9.5% of total company revenue in 2022. Despite challenging macro-economic conditions, CMOs continue to believe that their own economic outlook is strong despite inflation, the Russian invasion of Ukraine, supply chain issues, and rising energy prices.
“This should bode extremely well for Wishpond as it has become a one-stop-shop solution for all the marketing needs of small and medium businesses, with (over) 200 million leads generated and 1.5 million marketing campaigns launched since inception,” IA analysts noted.
'Deep' discount to peers
The tech firm is also trading at a deep discount to its peers, including Lightspeed, Mediavalet and Shopify Inc (TSX:SH., NYSE:SHOP). Wishpond is trading at just 1.2× of IA’s 2023 revenue estimate, which it noted is well below its Canadian SaaS comps at 5.2×, its North American Marketing comps at 4.2×, and the overall peer group average of 5.2×.
“We expect the company to deliver another exceptional quarter in 4Q and are projecting record revenues of $6.3 million while being adjusted EBITDA positive (around $288,000),” analysts noted.
IA has a Buy rating on both Wishpond and Lightspeed, and respective price targets of C$1.50 and US$29.
Wishpond shares were up around 6% on Wednesday at C$0.85 in Toronto.
--Updates with share price movement--
Contact Angela at angela@proactiveinvestors.com
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