Pushpay shares have climbed 12.9 per cent to $3.58 since the digital collection company released its interim result on Wednesday.
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But while the Reuters analyst consensus remains "hold", one analyst says even after this week's gains, the stock is still trading at a "deep discount" next to its ASX and NZX-listed peers.
Craigs Investment Partners analyst Stephen Ridgewell had a "buy" rating on Pushpay and a 12-month target price of $4.25 before the half-year numbers reported mid-week.
He has now raised his target to $4.75.
Pushpay has already upgraded its operating earnings guidance twice this year.
Ridgewell sees near-term scope for a third upgrade.
The company's success this year has demonstrated the scalability of its model as gross profit margin increased from 57 per cent to 65 per cent in the first half.
On Wednesday, new Pushpay chief executive Bruce Gordon talked up the possibility of accelerating growth through acquisition.
Ridgewell sees a positive investor reaction if the company fills out its range by building or buying an ERP (enterprise resource planning) app, the better to provide a full Church Management System (ChMS) - "which would allow it to effectively sell to the large number of Churches who want a simple IT environment and all-in-one ERP-style solution."
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But even as things stand, Ridgewell sees full-year operating earnings coming in at US$25.4m, above the US$23-25m revised guidance range.
It's not all apples. On Wednesday's analyst conference call, Ridgewell raised the spectre of competition from Blackbaud.
Gordon responded that Blackbaud's software was mainly used by Catholic churches, whereas "we tend to be predominantly Protestant today".
He added: "My personal view is that having two strong brands educating what is a reasonably conservative market place is a positive. We're confident in the head start we have and the moat we've built around our product. We're not unduly concerned [about Blackbaud]."
Pushpay saw the Catholic sector as a future area for growth, the CEO said.
Sydney-based Royal Bank of Canada analyst Garry Sherriff took a more conservative approach after the interim result, saying he suspected the market could push back, "with Pushpay having already secured the early majority of Protestant/Baptist churches in the US".
"[It] now has to bide time and wait for the late majority to choose to switch their donation platforms," Sherriff said.
Although continuing its three-day tear today, taking the stock to $3.58 (for a market cap of $985m), Pushpay is still shy of the $4.17 all-time high it hit after its huge run-up in 2017, which was followed by a trail-off.
Strong half-year result
On Wednesday, Pushpay reported a a net profit of US$6.5 million for the first half of its 2020 financial year (ending September 30) versus a net loss of US$4.4m for the year-ago period.
Pushpay has its head office in Auckland but most of its staff in Seattle. Large US churches provide the lion's share of revenue from its app, which manages collections and messaging to a congregation.
Earnings before interest, tax, amortisation and fair value adjustments (ebitdaf) were US$9.6m against the year-ago US$3.1m loss.
Pushpay raised its full-year ebitdaf guidance twice during the half. This morning, it reiterated its latest forecast for full-year 2020 ebitdaf of between US$23m and $25m (no net profit guidance has been given. In 2019, Pushpay made a maiden first-year profit of US$18.8m as it pushed strongly into the black in the second half - chiefly because US$20.24m income tax benefit).
Revenue increased 30 per cent to US$57.4m as customer numbers rose 7 per cent to just under 8000.
The company said earlier that although its growth had slowed in terms of the number of customers, it was now signing more medium to large churches that collect more money. To wit, total processing volume jumped 45 per cent in the first half to US$2.2 billion.
Cashflow improved from -US$5.1m in the first half of FY2019 to US$8.9m.
Average revenue per customer per month (ARPC) increased from the year-ago US$1060 to US$1272, after spiking to US$1548 over Christmas.
Year of transition
Pushpay has been going through a year of transition, as founders Eliot Crowther and Chris Heaslip have both quit their executive roles and sold large amounts of shares.
Crowther's departure coincided with his marriage breakup.
Heaslip said he was no longer the right fit to lead the company as it moved from its startup phase to being a global corporation more about "process and systems".
He and co-founder Crowther created Pushpay as a two-man startup in a Glenfield garage.
Now it has 360 staff and 7905 customers.
Gordon - a one-time mentor of the co-founders who was serving as chairman - replaced Heaslip as CEO (Heaslip remains as a non-executive director).
Gordon said on a conference call that customer gains had been "lighter" the first half, but said several initiatives were underway to turn that around.
And in what could prove a related note, he also said that an acquisition was possible.
"As we continue to execute on our strategy, we are also actively evaluating potential strategic acquisitions that broaden Pushpay's current proposition and add significant value to the current business," Gordon said.
Where Heaslip hinted Pushpay could expand into charities and the education sector, Gordon earlier told the Herald that the faith sector would remain the company's key point of focus for the immediate future. don't renew) had increased. Gordon said churn had actually lowered slightly.
Gordon also underlined Pushpay's goal to reach 50 per cent of medium to large churches in the US, representing US$1b in annual revenue. M&A could help accelerate the drive to that target, he said.
On the conference call, analysts tried to push the CEO for a timeframe, but he declined to give one for the "aspirational" US$1b target.