UPDATE: Pushpay shares were up 5.7 per cent to $8.19 in early afternoon trading.
Pushpay has been one of the standout performers of the pandemic, with its stock up 126.5 per cent for the year.
Its shares, which closed yesterday at $7.75 (for a $2.1 billion market cap) have recently pulled back and plateaued after a huge run-up.
But Jarden analysts Wassim Kisirwani and Wilson Wong see this as a temporary lull in a larger bull run.
In a new research note issued this morning, the pair - who have an outperform rating on the stock - hike its 12-month target price from $7.90 to $9.30.
That's a substantial jump, but still behind Forsyth Barr's Jamie Foulkes, who on September 10 increased his 12-month target from $12.42 to $13.06.
"We view weakness in the current share price as a good buying opportunity," Foulkes says.
Pushpay has seen a strong lift in sales as large US churches - which account for the bulk of its revenue - have moved services online, fuelling uptake of its digital donation and church management software.
But for Kisirwani and Wong, the market has yet to fully appreciate the Covid effect.
"2021 will be a remarkable year in Pushpay's trajectory, with the shift to digital donations
accelerating significantly, and its platform becoming indispensable to clients. We now expect to see three years' worth of growth compressed into one," they say.
The NZX-listed Pushpay, which is headquartered in Auckland but has the bulk of its staff in Seattle, has already raised its 2021 operating earnings guidance from US$48m-$52m (vs US$25.1m actual in FY2020) to US$50m-$54m.
But based on increased transaction volumes and market share, Kisirwani and Wong are picking US$57.2m - and the pair see "plenty of runway" for further growth, predicting a 13 per cent jump in operating earnings in 2022 and a 25 per cent increase the following year.
Craigs IP analyst Stephen Ridgewell agrees. He calls Pushpay's official guidance "conservative" and is also picking operating earnings of $57m for FY2021.
Dividend on the way
Kisirwani and Wong predict Pushpay will start paying a dividend in 2022, initially with a modest 0.9 per cent yield.
ForBarr does not see any profit payout on the immediate horizon.
Craigs' Ridgewell sees the capacity to pay dividends from FY2021, but doesn't see that as the right track.
"We think Pushpay has the ability to pay dividends in FY2021, given strong cashflow generation and moderate debt levels, but we think a better use of funds would be to reinvest that cash to support growth, including by selective acquisitions that will further entrench Pushpay's market leadership position as it moves from a payments-only solution to offering a "one-stop-shop" of mission-critical software for churches," he says.
"For example, we think Pushpay's acquisition of CCB [Church Community Builder] last year has been a great success, expanding Pushpay's product suite and value proposition to customers, while providing a good opportunity for Pushpay to cross-sell its payments solutions to CCB's customer base of mainly larger churches, which we understand has been well received by Pushpay's customers."
Constant growth, constant change at the top
After a banner FY2020, which included the purchase of Colorado-based church management system software maker Church Community Builder for US$87.5m ($132.2m) to flesh out its product offering, Pushpay shares slumped to $2.82 in March as the stock was caught up in general negative market sentiment as level 4 loomed. But its shares started to climb as it became apparent the pandemic was the spark many congregations needed to go digital, before recently giving up some of their gains.
It has not been smooth-sailing for whole sector, however. Nasdaq-listed Blackbaud - the closest thing Pushpay has to a direct competitor - has seen its stock fall around 25 per cent this year to a recent US$59.35 (for a market cap of US2.94b). Blackbaud is strong in Catholic churches (Pushpay's powerbase is Protestant), but it also offers payment services for general non-profits. A recent data breach, that caught up clients including the University of Auckland, which uses Blackbaud to manage alumni donors, did not help.
And while Pushpay's growth has been constant, there has been chopping and changing at the top.
Chris Heaslip quit as chief executive in May last year, just months after fellow co-founder Eliot Crowther.
Heaslip was replaced as CEO by former Pushpay chairman Bruce Gordon, who in turn announced at the company's annual meeting in June this year that he would step aside once a replacement was found.
Where Heaslip talked up expansion into the non-profit and private school markets toward the end of his tenure, Gordon preferred a "laser-like focus" on US churches, with an aspirational goal to capture 50 per cent of the market, equating to revenue of US$1 billion a year (FY2020 revenue was US$129.8m).
Pushpay's AGM on June 18 saw Justine Smyth confirmed as the company's first female director, only for Smyth to resign a month later in what she would only call a "personal decision" as she maintained various board roles elsewhere.
Earlier this week, Pushpay appointed Lorraine Witten as Smyth's replacement. Witten is also on the boards of two other NZX-listed companies: TIL Logistics Group and Rakon and a director of Horizon Energy.