Nearmap share price: are investors preparing for a sell-off?
As Nearmap’s short interest passes 10%, we examine the current broker outlook – which stands in stark contrast to the company’s mounting short interest.
The headline is a provocative one. Yes. Yet the point is also a salient one: a significant portion of Nearmap’s stock is currently held short by investors and traders – according to ASIC’s most recent short data.
11.19% of its stock, to be precise.
This makes Nearmap (ASX: NEA) the tenth most shorted stock on the ASX, notes Shortman.
This comes after the company just recently finalised a US$3.5m technology acquisition from roof geometry company Pushpin. The Nearmap share price even rose 7% yesterday and though it pulled back today it is still up 83% YTD.
Nearmap is also overwhelming liked by analysts: with 85.7% of analysts rating the stock a BUY, according to Bloomberg Data.
Of the brokers covering the stock, Morgan Stanley currently has an OVERWEIGHT rating and a price target of $4.20; and Macquarie Wealth Management has an OUTPERFORM rating and a price target of $3.45 per share.
In fact, on the bearish end of the spectrum, Evans & Partners rate Nearmap (ASX: NEA) a NEUTRAL, with a price target of $3.07 per share. Even on this ‘bearish’ price target, analysts look to be expecting some 8% upside from here.
Growth looks to be the name of the game here. According to Bloomberg Data, analysts are expecting aggressive top and bottom-line growth from the fast-growing aerial imagining company in the coming years.
On the top-line, analysts are estimating Nearmap’s revenue to rise from $77.8m in FY19 to $100.5m in FY20 and $132.4m in FY21 – according to Bloomberg Data.
On the bottom-line, analysts expect the company’s adjusted earnings (EBITDA) to also rise significantly, forecasted to reach $8.4m in FY20 and 19.3m in FY21 – according to Bloomberg Data.
Finally, the company remains well capitalised, with $75m in cash and cash equivalents on hand. Though, the company was still loss-making in FY19.
Nearmap share price: musings on the short play
When looking at all this, it is interesting then that a significant portion of the market is expecting the stock to fall. That after all, is the point of taking a short position.
Indeed, Nearmap’s valuation is high – when compared to the market average and historical valuations, that is – with the company currently boasting a price-to-sales ratio P/S of 15.95x. Analysts, expect this ratio to soften in the coming years – falling in to 12.88x in FY20e and 9.77x in FY21e – also according to Bloomberg Data.
In saying that: expensive Australian technology stocks are hardly a new phenomenon.
As a recent Livewire article pointed out:
‘Australian high-growth stocks, which the WAAAX stocks are a part of, are now the most overvalued in the world. High-growth stocks are on average trading at a forward price-to-earnings ratio of 38.9x, which is now 65% above the global average.’
And though analysts are bullish, there are risks. Morgan Stanley flagged weak US growth, poor cross-sell sales and intensifying cash losses, as some key ones to Nearmap investors.
In saying that, the 11% short interest potentially suggests that the market is more concerned about these risks than analysts are.
The Nearmap (ASX: NEA) share price fell 1.75% today and currently trades at $2.81 per share.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.