Whether a short seller’s target deserves a dressing down or not, the negative expose often has the desired effect.
Case in point: Nuvei (NVEI). Shares took a beating in Wednesday’s session, dropping by 40% following a report by short seller Spruce Point Capital Management.
The report centered around previous business failures – the payment processing company was formerly known as Pivotal Payments – management’s background, its relationships with questionable individuals and organizations and a “highly suspect” acquisition policy. Questions regarding Nuvei’s organic growth were also raised while the company’s financial disclosures also came under fire.
Nuvai has since released a statement reaffirming its financial outlook for the year and growth targets, claiming the short seller is “intentionally misleading and draws inaccurate conclusions, innuendo and character attacks on key executives” all to “profit significantly from Nuvei’s stock price decline.”
Assessing the allegations, RBC’s Paul Treiber notes the company and management’s background were already known when Nuvei went public last year (Sep 2020).
As for recent acquisitions, these have been “relatively immaterial” on the financial side and have mostly added technology capabilities, rather than customer relationships or revenues.
While the shares had performed well since the IPO until the short report’s publication, Treiber puts the strong display down to “significant acceleration in Nuvei’s current and anticipated organic growth.”
“For example,” says the analyst, “Nuvei has achieved an average of 45% organic growth in the 5 quarters since the IPO, compared to the 18% in our model when we initiated coverage on Nuvei.”
And going by the company’s outlook, it appears they believe the recent acceleration in growth can be sustained. Furthermore, given management’s disclosure that no single vertical is above 20%, Treiber believes the growth is “broad-based and not attributable to a single customer.”
As far as financial disclosures are concerned, Treiber admits the company divulges fewer operating metrics than peers, but that it has “started to provide additional disclosures.”
As such, Treiber sticks to an Outperform (i.e. Buy) rating along with a $145 price target, implying one-year upside of a sturdy 125%. (To watch Treiber’s track record, click here)
Overall, most of Treiber’s colleagues agree. With 6 additional Buy ratings and 1 Hold, NVEI stock has a Strong Buy consensus rating. There’s plenty of upside projected too; investors will be sitting on returns of 109%, should the $130.81 average price target be met in the year ahead. (See NVEI stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
