Why Shares of Nuvei Are Falling This Week

Despite falling more than 10% this week so far, Nuvei’s strong long-term outlook makes it worth buying on the dip.

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Shares of Nuvei (TSX:NVEI) are on a downward trend this week, losing about 11% of their value since Monday. By comparison, the main TSX index has inched up more than 1% so far this week. The payment technology firm has been one of the best-performing stocks on the TSX in the fourth quarter of 2023, surging more than 70%. However, NVEI stock has lost nearly 8.1% of its value in the first quarter of 2024.

Before discussing whether Nuvei stock is still a good buy in 2024, let’s take a look at some main fundamental reasons for the recent selloff in the stock.

Nuvei stock

If you haven’t heard of it already, Nuvei is a Montréal-headquartered financial technology company that primarily focuses on providing payment solutions to merchants across the globe. It currently has a market cap of $4.4 billion as NVEI stock trades at $32 per share after sliding by nearly 29% in the last year.

Nuvei stock started a stellar run after it began trading on the Toronto Stock Exchange in September 2020. The stock surged nearly 300% within a year to reach a peak of around $175 per share in September 2021, attracting growth investors’ attention. Since then, several negative factors have affected its price movement, including a tech sector-wide selloff in the post-pandemic era and a critical report about Nuvei by a New York-based short-seller.

Despite these setbacks, a spectacular recovery in NVEI’s share prices took place in the final quarter of 2023 with the help of consistency in its sales growth and the growing possibility of interest rate cuts in the near term.

Why NVEI stock is falling this week

NVEI stock tanked by 10.3% earlier this week on March 6, a day after its fourth-quarter financial results came out. During the quarter, a solid 53% YoY (year-over-year) increase in the Canadian tech firm’s total volume led to a 46% increase in its total revenue to US$321.5 million.

Strong demand for its services in most key markets, especially in North America, helped the company post adjusted quarterly earnings of US$0.47 per share, stronger than the Street’s expectations of US$0.45 per share. To add optimism, Nuvei’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin in the December quarter improved to 37.3% from 36.3% in the previous quarter.

However, Nuvei apparently warned investors about macroeconomic uncertainties and a conservative expectation on the timing for new customer implementations, which could potentially lead to challenges and affect its growth in the short term.

The company also highlighted near-term adjusted EBITDA margin pressures from integrating Till Payments, which could fuel short-term profitability concerns. Despite these profitability concerns, however, Nuvei continues to aim for a breakeven or better outcome by year-end 2024.

Despite its stronger fourth-quarter results, these warnings about the short-term outlook could be the primary reason why its share prices plunged sharply this week.

Foolish takeaway

While it’s true that the ongoing macroeconomic uncertainties are taking a toll on the growth of businesses globally, including Nuvei, consistently growing demand for its payment solutions and its focus on further market expansion makes its long-term outlook very positive. That’s the key reason I think investors should take advantage of this week’s sharp decline in Nuvei stock and buy it right now before it stages a sharp recovery.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has positions in and recommends Nuvei. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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