- Nuvei Corp. stock (TSX:NVEI) dropped by almost 40 per cent to an all-time low on Wednesday after releasing Q2 results
- While lower revenue projections have dampened investor sentiment, continued profitability and strategic partnerships afford the company a bright future
- Nuvei offers modular, flexible and scalable payment processing technology in 150 currencies across hundreds of payment methods
- Nuvei stock (TSX:NVEI) is down by 2.67 per cent trading at $23.65 per share
Nuvei Corp. stock (TSX:NVEI) dropped by almost 40 per cent to an all-time low on Wednesday after releasing Q2 results.
The drop can be attributed to the Montreal-based company’s reduced revenue outlook through 2023, as well as an earnings miss of around 15 per cent compared with analyst estimates.
Q3 and year-end outlook
Nuvei views its slower growth as a function of increased lag times onboarding new clients onto its payments platform, in addition to the termination of a relationship with a top client that “was no longer a fit for Nuvei,” according to a statement by Chairman and CEO Philip Fayer on the Q2 conference call.
After reaching more than C$24 billion in market cap in 2021, the company has since fallen to just under C$3.5 billion, as technology stocks have received the brunt of the post-pandemic cooling period following meteoric rises (and corrections) from the likes of Snapchat, Lightspeed, DoorDash, Uber and Salesforce, to name just a few.
Given the secular nature of the pandemic, the inflation it generated because of global financial stimulus, and the ongoing attempts of central banks to raise interest rates and bring economic production down to sustainable levels, we view Nuvei shares as trading at a significant discount to fair value. There are numerous reasons to get behind this thesis.
Firstly, despite a more tempered revenue outlook, revenue actually increased in Q2 by 45 per cent to US$307 million from US$211.3 million. This is in addition to the company topping consensus revenue estimates four times over the past four quarters, according to Zacks.
Secondly, despite the earnings miss, Nuvei remains profitable, having generated net income of US$11.6 million for the quarter. While the company has surpassed consensus EPS estimates only once in the past four quarters, according to Zacks, it is generating cash, which will serve to see it through market fluctuations as it expands market share with a variety of initiatives.
The company signed a multi-year sponsorship in February with the Mercedes-AMG PETRONAS Formula One team, including logo placements on the helmets of drivers Lewis Hamilton and George Russell. Nuvei followed up this deal in April with a creative partnership with actor and entrepreneur Ryan Reynolds, who has made an investment in the company.
These advancements in brand awareness coincide with total volume across the Nuvei platform increasing 68 per cent in Q2 to US$50.6 billion from US$30.1 billion, validating the company’s approach to growth without sacrificing profitability.
From a broader perspective, Nuvei has also successfully integrated itself into global payments infrastructure, with a presence in more than 200 markets and high-profile partners like Virgin Atlantic, New Balance, SHEIN, Riot Games and Radisson Hotel Group diversifying the company’s revenue base and cementing its reputation as a flexible and low-cost payments provider.
Recent customer acquisitions continued through Q2 with the addition of Cart.com, RentCars, InDrive, Infor, SAP, the U.S. Virgin Islands, the cities of St. Petersburg, Florida, Erie, Colorado, and Llano County, Texas, one of the fastest-growing global online marketplaces, three top-20 global airlines, and two large integrated software vendors, each of which processes more than US$1 billion of annual volume and services across 20,000 North American locations.
While more volatility is likely in store as slower economies delay business transitions to digitized payments, the payments processing market is slated to grow 10x over the next decade, affording major players like Nuvei a key advantage as it continues to leverage established partnerships into a stronger leadership position.
Near-term catalysts include approximately US$100 million in annualized revenue to be activated over the next year, as well as management’s plan to accelerate growth in the emerging B2B, government and integrated payments channel to over 20 per cent over the next three to five years.
Below are the company’s growth targets over the next three to five years (medium term) and five to seven years (long term).
Nuvei is a Canadian fintech company offering modular, flexible and scalable payment processing technology in 150 currencies across hundreds of payment methods.
Nuvei stock (TSX:NVEI) is down by 2.67 per cent. trading at $23.65 per share as of 10:07 am ET.
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