Analysts at HC Wainwright & Co reiterated their “Buy” rating and $2.50 price target for NexTech AR Solutions Corp, citing the metaverse company’s third-quarter results that saw increasing demand for 3D models.
For the third quarter that ended September 30, the Toronto-based provider of augmented reality (AR) wayfinding technologies and 3D model services, reported around C$3 million in revenue, which was largely in line with HC Wainwright’s C$3.2 million estimate.
“Large new orders should drive accelerating technology service revenue growth. More important than the consolidated revenue number, technology service revenue of C$920.8K was up 66.4% sequentially and is expected to increase further in 4Q22 as the company delivers a single C$700K order,” said the analysts.
“Momentum should carry into calendar 2023, as the company is expected to deliver on a C$6.7M 3D model order for Amazon.com Inc (NASDAQ:AMZN) announced in October of this year. We believe this relationship could be expanded in 2023 and expect the company to announce additional 3D modeling contracts with other large e-commerce companies over the coming months.”
The record C$6.7 million purchase order from Amazon's Prime Marketplace, could potentially grow to as much as $1 million per month, according to the analysts.
Meaningful revenue growth opportunity
Moreover, NexTech continues to negotiate 3D modeling contracts with other large enterprise customers, which we believe could be announced over the coming weeks and months.
“This should begin to provide some strong visibility on 2023 revenue, which we are modeling at C$15M. With the e-commerce industry exceeding C$5.5T, we believe there is a meaningful opportunity for NexTech AR to continue to grow wallet share within the current customer footprint as well as add new 3D model customers over time,” said the analysts.
HC Wainwright noted that at “60% plus margins,” it believes NexTech’s revenue growth, coupled with recent operating expense reductions, “should result in significant operating leverage” and potentially positive EBITDA as early as 2024.
“We recommend investors take advantage of this period of business transition to accumulate NEXCF shares at what we view as a meaningful discount and ahead of what we anticipate being a significant improvement in operating results,” added the analysts.
HC Wainwright concluded that NexTech’s valuation is “attractive” given the advanced technology company’s “meaningful revenue growth opportunity” and a clear path to profitability.
“We are valuing NEXCF shares at $2.50, reflecting a 20.0x EV/revenue multiple on our 2023 revenue estimate of $15M. Our $2.50 price target represents approximately 200% upside from recent trading levels,” added the analysts.
Nextech shares currently trade at C$1.08 on the Canadian Securities Exchange, and US$0.82 on the OTC Markets.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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