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Broker wrap: Nearmap share price surges following FY20 results

We briefly look at the key figures from the company’s full-year report, as well as how Goldman and Macquarie currently view the stock.

FY20 results: Quick-take

While aerial imaging company Nearmap (NEA) saw its share price come off on the day of its full-year release, the stock has since rallied strongly, gaining ~25% since last Thursday’s open and yesterday’s close, finishing out the session at $3.04.

The stock continued to trend higher on Tuesday, 25 August.

Looking at the headline figures of the FY20 release, on a year-over-year basis, the company reported:

  • Group annualised contract value (ACV) of $106.4 million, up from $90.2 million in FY19
  • Statutory revenues of $96.7 million, up 25%
  • Group earnings (EBITDA) of $9.1 million
  • A cash balance of $33.8 million

Speaking of these results, Nearmap's CEO, Dr Rob Newman noted:

'The resilience of our business model and the value customers derived from our content as they adapted their business models to remote working has never been stronger.'

Though the company said it expected to ‘continue its strong growth trajectory’ in fiscal 2021, these growth expectations were not quantified in financial terms.

Nearmap share price: the analyst view

As it stands, analysts overall remain incredibly optimistic over Nearmap’s prospects, with the stock carrying a Buy rating on average, according to the Wall Street Journal.

On a more granular level, the average price target for Nearmap currently stands at $3.06 per share, suggesting the stock may be trading around fair value, also according to the Wall Street Journal.

Nearmap last traded at $3.08 per share.

Analysts from Macquarie Wealth Management reiterated their Outperform rating, while citing a 12-month price target of $2.75 per share, in response to the FY20 release.

Overall, while the investment bank was impressed by the company's ACV growth, and focus on targeting cash flow breakeven, weaker Australia & New Zealand segment contributions; and higher churn figures were cited as two negatives.

Specifically, Nearmap's churn rate came in at 9.9% in FY20, almost doubling its FY19 churn rate. This weakness was attributed to the ‘subscription churns’ of a number of enterprise customers in North America.

Elsewhere, the company reported local (Australian & New Zealand) ACV growth of 11% in fiscal 2020, lagging behind the growth of its North American segment, which hit 27% during the year.

In spite of those factors, the investment bank maintained that Nearmap ‘continues to offer LT growth opportunity and remains materially underpenetrated, despite being well ahead of ANZ at same point.’

Analysts from Goldman Sachs also remain positive on Nearmap in the wake of the company's full-year results, describing them as 'solid' given the current macro headwinds.

The investment bank reiterated its Buy rating on the stock, eyeing stronger growth in fiscal 2022 and arguing that ‘more positive operating leverage from FY22E than previously assumed as its current cost structure, while higher in FY21 than our prior forecasts, can support a re-acceleration of growth beyond FY22.’

Goldman has a price target of $2.90 on NEA.

How to trade Nearmap, long or short

In the wake of Nearmap’s FY20 results, where do you stand: are you bullish or bearish on the aerial imaging company? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Nearmap using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Nearmap’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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