Nuvei bets big on online gaming
Nuvei Corp. ( NVEI. TO) might be even more of stock- market darling than its peer Lightspeed. As the chart below shows, Nuvei stock has nearly doubled in value since the Montreal firm’s initial public offering in September. That has given Nuvei a market cap of $ 8.9 billion against modest revenue of $ 246 million in the firm’s latest fiscal year. That IPO itself was 20 times oversubscribed, enabling Nuvei to raise $ 1.0 billion from stockmarket investors, about onethird more than it originally hoped for.
Such is the investor enthusiasm for stocks related to online business that Nuvei shares were snapped up at a furious pace despite a Nuvei record of losses in each of its past three years. Revenues have almost doubled in that time, but losses have increased more than fivefold.
Nuvei is a player in e- commerce and “m- commerce,” payments made on mobile devices. Its secure software technology enables Nuvei’s merchant customers, including the proliferation of online gaming providers across North America, to accept a large variety of payment types, from traditional credit cards to alternative payment methods like PayPal and ApplePay.
Nuvei’s products are appealing in a world of cyberattacks, and one in which online purchasing was surging even before the pandemic. But investors are pricing the stock as though a totally cashless society has already arrived, that demand growth for online transactions is infinite, and an assumption that Nuvei can push its cost curve below its rate of revenue growth.
Bottom line:
Alot of favourable expectations are built into the prices of these two stocks. Whether they pan out or not, the possibility of a merger of these similar firms can’t be dismissed. Indeed, a takeover premium built into these stock prices is another factor in their lofty valuations.