Pivotree Inc. (TSXV:PVT) is growing rapidly with limited competition, says one analyst
Capital Ideas Media | January 22, 2021 | SmallCapPower: COVID-19 has the accelerated the movement towards online shopping and there’s one Canadian small-cap company in particular that is expected to benefit greatly from this trend.
(Originally published on Capital Ideas Media on December 1, 2020)
Toronto-based Pivotree Inc. (TSXV:PVT), which went public just a month ago, is helping its large merchant and branded manufacturer clients design, build and run turnkey eCommerce systems, tailoring solutions to its client’s needs.
[Editor’s Note: Shares of Pivotree climbed 19% less than a month after Capital Ideas wrote about the company.]
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“Pivotree is growing rapidly and is well positioned as a differentiated provider of commerce solutions with a large addressable market and limited competition,” wrote Paradigm Capital analyst Daniel Rosenberg in a recent note to clients.
Mr. Rosenberg noted that the Company’s more than 170 and growing customer base globally includes well-known names such as Electrolux, Vitamix, Manulife, Canon and Herschel.
“We believe Pivotree is an attractive investment opportunity offering investors exposure to eCommerce trends, with the potential to accelerate growth through M&A,” he said, adding that Pivotree’s gross margin is more than 50%.
This past week, Pivotree reported better-than-expected Q3 2020 revenue of $16.2 million, driven largely by 14% growth in the Company’s Managed Services (MS) segment, which Canaccord Genuity analyst Robert Young called a ‘Goldilocks’ quarter: “Not too hot, not too cold.”
“In general, we would expect to see more steady growth out of Pivotree as the recurring revenue (75 per cent of total revenue in Q3) driven primarily by MS contracts creates a baseline that the Professional Services business adds some volatility to as projects ramp and roll off. We don’t expect Pivotree to spool up large projects quickly, which suggests singles and doubles over home runs as we look ahead.”
Canaccord Genuity analyst cautions that although he expects a “steady ramp” overall through the fourth quarter and 2021, led by MS, he anticipates EBITDA margins to “be under some pressure” as revenue grows.
Nonetheless, he believes Pivotree is focused on driving 20-25-per-cent top-line growth, driven by significant demand, coupled with EBITDA margin expansion toward 20 per cent-plus in the medium term.
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