The Pushpay Holdings Ltd (ASX: PPH) share price is currently $1.47, which may represent a really good opportunity. It’s going to release its FY21 result this week.
What’s going on with the Pushpay share price?
Pushpay has been one of the ASX shares that have seen a big jump in volume during the COVID-19 pandemic.
But in recent weeks and months, the share prices of those ‘COVID shares’ has started to unwind, particularly ones that are seeing a slowdown or reversal of demand. Businesses like Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL) and Afterpay Ltd (ASX: APT) have seen their share prices fall.
It’s difficult to keep growing at the same pace, particularly when some stay-at-home trends are reversing.
But there are some trends which may not go back. The world is steadily shifting to digital payments. I’d imagine most people will appreciate the convenience of electronic payments, and not want to go back. That’s the trend that Pushpay has tapped into since creation, particularly over the last year or so.
Its digital donation systems have been in high demand. The HY21 report saw processing volume go up by 48% to US$3.2 billion. That drove operating revenue higher by 53% to US$85.6 million.
Net profit after tax (NPAT) grew 107% to US$13.4 million and operating cashflow rose 203% to US$27 million.
What are the potential problems?
But the share price has been falling. If growth slows considerably then that could worry the market. If church client numbers aren’t growing then that could also cause concerns for investors.
The outlook will be particularly important. If Pushpay warns of a slowdown or reversal then that could disappoint the market.
Investors may also pay close attention to growth initiatives. If Pushpay says it’s going to start spending a lot of money on funding growth then that could worry margin-focused investors.
My views on the Pushpay share price
The ASX tech share has a long term target of US$1 billion of annual revenue. So, Pushpay is a long way from reaching that and it has a long runway. Whilst Pushpay’s market share of donations may have gotten a boost, the economic recovery could see the overall donation pool grow, benefiting Pushpay.
I think that Pushpay’s long term margin improvement potential, as well as potential addressable market expansion (to new countries) makes the Pushpay share price attractive today.
Using the forecast on CommSec, the Pushpay share price is priced at 26 times the estimated earnings for the 2022 financial year.
