The Nearmap Ltd (ASX: NEA) share price is out of form with the rest of the S&P/ASX 200 Index (ASX: XJO) on Wednesday.
At the time of writing the aerial imagery technology and location data company's shares are down 3% to $1.20.
Is this a buying opportunity for investors?
This latest decline means that Nearmap's shares are now down 72% from their 52-week high.
While this doesn't necessarily mean they are dirt cheap (they were previously trading on a sky high valuation), I do see a lot of value in its shares at this level.
Especially after its recent business update revealed that it is on track to achieve its guidance for annualised contract value (ACV) in the range of $102 million to $110 million in FY 2020 despite the coronavirus pandemic.
The update also revealed significant cost cutting measures which are expected to make the business cash flow breakeven by the end of the financial year. This is a particularly big positive as its cash burn had been criticised previously and there was speculation that a capital raising would be necessary.
Goldman Sachs retains its buy rating.
I'm not the only one that is cautiously optimistic on the investment opportunity with Nearmap following its update.
According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted the price target on its shares to $1.50. This price target implies potential upside of 25% over the next 12 months.
It commented: "We previously assumed a A$30mn equity raising would be required in FY21E but now remove this assumption as the opex and capex savings implied in NEA's update remove the need for this on our forecasts."
"We acknowledge a broad economic slowdown in its key geographies (ANZ and North America) present uncertainties in its growth outlook, but we believe our forecasts remain achievable noting we assume FY20E ACV of A$100mn (below company guidance of A$102-110mn) and FY21E ACV growth of +6.6% to A$107mn. For context, NEA's longer-term growth in ACV targets remain 20-40% p.a."
