Aerial imaging company Nearmap Ltd [ASX:NEA] is being squeezed heavily by the market today. At time of writing, the stock is down 11.4% and falling.
As for the reason for this huge sell-off, it seems that the company’s AGM update hasn’t been well-received. Despite the fact that — for the most part — it’s forecasting more growth ahead for this flourishing business.
So why are investors up in arms?
Let’s take a look and see for ourselves…
No love lost, despite more growth ahead
Despite some recent setbacks, Nearmap has made a name for itself as a robust growth stock. The kind of investment that flew up the small-cap rankings and flirted with mid-cap status back in mid-2019.
Today though, the story is a little different.
Nearmap’s market cap is back below the one billion-mark, sitting at just over $953 million currently. A fall that can also be seen from their downward share price trend from a strong $4 per share two years ago to $1.90 at time of writing.
Despite all that, the underlying business has actually been relatively solid. Achieving some level of growth over the past three financial years. And management confirmed that they’re aiming to maintain this momentum in FY22.
Nearmap has forecast an annual contract value (ACV) of between $150–160 million for the current financial year. A figure that would represent roughly a 12–19% improvement over their FY21 results. The kind of steady growth that is often enviable in the small-cap world.
And better yet, in the medium to long term, Nearmap has set its sights on ACV growth of 20–40%, meaning they’re still setting the bar high for years to come.
However, this could also be the reason for the sell-off today. As their current guidance — even at the top end — is just shy of this benchmark. Perhaps shareholders were hoping for something closer to these more future-focused goals.
Nearmap Chairman Peter James was clearly looking ahead to the positives, as noted in his address:
‘Nearmap is a deep technology company. Our proprietary and patented portfolio of world leading aerial camera systems enables the creation of all the different content types we sell, whether it be 2D or oblique imagery, 3D, Nearmap AI or roof geometry technology.
‘In FY21 we announced the completion of the design of our next generation proprietary camera system, HyperCamera3. A prototype of the system was tested in flight and we anticipate commercial roll-out of these new systems in FY22. There were significant technological challenges to overcome in designing a camera system of this complexity, but our world class team delivered. Their work means that Nearmap has further extended our already significant technology leadership position.’
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What’s next for Nearmap?
With the general plan laid out for FY22, all Nearmap needs to do now is execute it. And while it’s obviously easy to say that, pulling it off will be the real test.
After all, this is a stock that has become somewhat of a punching bag — as shown by their share price performance over the past two years.
Fortunately, with the worst of the pandemic now likely behind us, and a slew of new technology, Nearmap is looking like it’s in the best position possible to meet expectations. Even if those expectations have been somewhat lowballed by management’s own forecasts.
All shareholders can do now is wait and see what the next seven or so months can bring.
And in the meantime, if Nearmap’s new AI direction has you excited, well, we have the report for you. Because they certainly aren’t the only company looking to make use of this emerging technology.
In fact, we’ve put together a list of five AI stocks that every investor needs to know about. Each of which has the potential to deliver some incredible returns if they live up to their potential.
Check out the full report, including these five stocks, right here.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here
