With nearly 33% to date losses, Nuvei (TSX:NVEI) is one of the worst-performing TSX Composite components in 2023. After ending the year’s first quarter on a solid note by rallying more than 70%, NVEI stock has shed over 60% of its value since then. By comparison, the main index on the Toronto Stock Exchange is currently up 2.7% on a year-to-date basis.
Before we discuss what investors should do with Nuvei stock right now, let’s find out some possible fundamental factors for its dismal performance in recent months.
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Key factors affecting Nuvei stock price movement lately
If you don’t know it already, Nuvei is a Montréal-headquartered company that focuses on providing payment technology solutions to merchants across the globe. At the time of writing, it had a market cap of $3.2 billion, as NVEI stock trades at $23.04 per share with about 49% month-to-date losses.
Before learning about key factors affecting Nuvei stock lately, we should look at another key factor that has been affecting its stock price for nearly a year and a half now. A big selloff in the share prices of the Canadian payment technology company started in December 2021 after a New York-based short-seller, Spruce Point Capital Management, released a severely critical report about its business operations and management practices.
Although this short report failed to make any major changes in Street analysts’ opinion about Nuvei, it apparently had a big negative impact on retail investors’ sentiments, as the stock witnessed a big selloff after the report’s publication and has struggled to fully recover ever since.
Nonetheless, Nuvei managed to beat analysts’ earnings estimates in all four quarters of 2022. Besides a tech sector-wide recovery, its continued strong financial performance, even in a difficult macroeconomic environment, could be the primary reason for driving NVEI stock up by 71.1% in the first quarter of 2023.
However, Spruce Point Capital targeted Nuvei again in April 2023 by releasing another critical report, which was enough to trigger another selloff in its share prices. To make the situation worse, Nuvei missed Street analysts’ earnings expectations in the second quarter, playing a key role in driving its stock down by 48.8% in August so far.
What’s next for NVEI stock?
It’s true that Nuvei’s adjusted earnings per share declined by 14% in the first half of 2023 on a year-over-year basis due mainly to the challenging macroeconomic environment. But at the same time, its top-line growth remained very strong, with its total revenue jumping 32% in the first two quarters of the year combined.
Besides that, Nuvei’s key focus remains on improving its long-term financial growth prospects by making quality acquisitions to help its business grow even faster in the coming years. For example, in its latest earnings report, the company highlighted that “the integration of Paya and achievement of the estimated $21 million cost synergies within 24 months post-closing is currently progressing according to plan.”
Moreover, if the Canadian payment technology firm maintains this strong sales growth rate in the coming quarters, it shouldn’t take very long for its earnings growth rate to turn positive again, especially after the ongoing economic challenges start gradually subsiding. Given these positive factors and its strong long-term fundamental outlook, I find NVEI stock highly undervalued at the current market price, making it worth buying to hold for years to come.
