The Nearmap Ltd (ASX: NEA) share price is taking a beating for a second day following the release of its full year results update on Friday.
The NEA share price fell 2.7% to $3.25 in morning trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index shed 0.7% but the aerial mapping technology company is still up by around 125% over the past year even with the latest bout of selling.
That's an enviable return for the small cap stock even though it doesn't quite match up to the gains made by the Advance Nanotek Ltd (ASX: ANO) share price, the PPK Group Limited (ASX: PPK) share price or Avita Medical Ltd (ASX: AVH) share price.
Profit taking presents buying opportunity
But it isn't game over yet for Nearmap as most brokers believe the pullback in its share price is a buying opportunity.
There doesn't seem to be anything sinister behind the sell-off. The drop is probably triggered by "buy the rumour, sell the fact" investors locking in some hefty profits as the company's FY19 results showed strong 36% growth in annualised contract value (ACV) to $90.2 million.
The result was a little below what the market was expecting, according to Macquarie Group Ltd (ASX: MQG) but the broker isn't worried and is reiterating its "outperform" recommendation on the stock with a 12-month price target of $4.16 a share.
Macquarie noted that Nearmap still delivered record ACV and the growth momentum was carrying through from the previous period.
"ACV was slightly lighter against market expectations, but the share price weakness leading into today's update and subsequent move suggest it is fully reflected (and some)," said the broker.
"Trading on 13.6x FY20 EV/Sales, NEA is at a -32%/-24% discount to domestic/US peers. As such, weakness appears a buying opportunity."
Exchange rate offsets lower growth
Morgan Stanley is also tipping further upside for Nearmap and is sticking to its "overweight" recommendation on the stock and a price target of $4.20 a share.
While ACV values for North America and Australia and New Zealand were a little behind its forecast, the weak Australian dollar ensured the result was a little ahead of the broker's estimate.
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