Nextech AR Solutions Corp. (CSE:NTAR, OTCQB:NEXCF) showed a rapid uptake of its augmented reality 3D model subscription business during third quarter 2022, placing it squarely in the way of a boom in revenue, according to Zacks Investment Research.
A Zacks analyst said that, as one of the first movers in a multi-billion dollar market, Nextech should be able to grow rapidly as this nascent AR sector explodes.
“The company is landing new large customers for its modelling business and we expect that business to ramp rapidly. It is winding down its eCommerce business to become a pure play in 3D by year-end,” the analyst wrote in a report.
READ: Nextech AR reports record 3Q earnings, including 3D modelling revenue surge of 192%
According to Zacks, Nextech plans to deliver US$700,000 worth of models to Amazon alone in 4Q and the business continues to thrive.
"Nextech AR is a technology start-up and a unique public company investment in augmented reality (AR) and the metaverse. It does not produce hardware, but rather uses AR to improve eCommerce results for customers as well as its company-owned sites,” the analyst wrote.
Just as importantly, the company reduced its cash burn so as to have enough cash on hand to last the next twelve months at least, alleviating the fear of any dilution, according to Zacks.
In addition, since its successful spin-off of ARway (CSE:ARWY) in October, it now owns 13 million shares of a publicly traded stock worth C$26 million. Although it has a lock-up, some of those shares are currently tradable and if nothing else, provide a reserve for cash if ever needed, the analyst said.
Based on an enterprise value (EV) to estimated EV/2023 sales multiple of five times, Zacks said it believes Nextech stock could be worth US$1.33 per share, up from its current price of $0.84 per share.
Nextech 3Q effect
Zacks wrote that Amazon has started to order models and has a US$6.7 million purchase order to be delivered in 2023. This is above and beyond the $700,000 being booked in 4Q.
“So far, Amazon has primarily ordered only home goods items. It is expected that Amazon will allow vendors that sell on its platform to put their own 3D models on its site and will identify Nextech as a preferred vendor for those models early next year,” according to the report.
After the successful spin-off of ARway (CSE:ARWY), Zacks said it expects Nextech is contemplating other possible spin-offs from its portfolio of products and technologies although nothing near term.
Nextech now trades at an enterprise value of C$108 million (US$80.7 million). It also owns 13 million shares of ARWY valued at C$25.6 million (US$19.2 million). Zacks said it estimates revenues of C$22 million next year making EV to sales 4.9 times or 3.7 times if the value of the ARway holding is subtracted.
Nextech ended the September quarter with $5.3 million in cash, working capital of $5 million, and no debt. The company is working to reduce its cash burn and believes it will have enough cash for the next twelve months, according to Zacks.
Contact the author at susie@proactiveinvestors.com