Canaccord Genuity lowers target price on DotDigital
By Iain Gilbert
Date: Thursday 27 Jan 2022
(Sharecast News) - Analysts at Canaccord Genuity cut their target price on software firm DotDigital from 265.0p to 205.0p on Thursday but stated the group still appeared to be on track for profitable double-digit growth.
Canaccord Genuity said following record organic growth in the last financial year, DotDigital's recent first-half trading update indicated somewhat slowing momentum, with organic sales growth of 10% to £30.9m.
Based on the statement, the analysts believe growth in DotDigital's largest market, the UK, was in the double digits, with some slowdown in SMS momentum in verticals that heavily increased usage last year during Covid-19 lockdowns, while Asia-Pacific growth of 27% was also encouraging.
However, the Canadian bank noted that DotDigital had seen "a meaningful slowdown" in the US, where new sales had been impacted by a tight labour market and high salary inflation, which made it difficult to backfill sales roles in the region.
"Given ongoing expected revenue and earnings per share growth and high recurring revenues and margins, we maintain our 'buy' rating with a reduced target price of 205.0p (was 265.0p), based on 7.5x calendar 2023E enterprise value/sales," said Canaccord.
"We note this is a sizeable discount to MarTech industry M&A transaction multiples averaging ~13x, which should, in our view, help underpin the shares' valuation."
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