Is the Pushpay Holdings Ltd (ASX: PPH) share price a buy after falling 22% in just three weeks?
Pushpay is an electronic donation business that facilitates digital giving, mainly for clients like large and medium US churches.
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Why has the Pushpay share price fallen?
Pushpay saw its shares rise by 235% between 16 March 2020 and 28 October 2020. The company is involved in helping US churches remain connected with their congregations. Not only does Pushpay's technology help churches receive donations in a socially distanced world, but it also provides livestreaming capabilities.
The Pushpay share price dropped after the US election and it has dropped 13% since the news of the 90% effectiveness of the BioNTech – Pfizer vaccine.
Indeed, many of the ASX tech shares focused on digital services have seen falls. Other examples include Temple & Webster Group Ltd (ASX: TPW) and Kogan.com Ltd (ASX: KGN).
The Motley Fool's Pro service speculated that the market may not have appreciated the company saying that its strong cash and cashflow position may help consider other acquisition opportunities. Another reason for the selloff could have been because of board changes and share sales.
What growth has Pushpay been reporting recently?
Pushpay recently released its FY21 half-year result. It reported that its operating revenue increased by 53% to US$85.6 million. This was driven by total processing volume growth of 48% to US$3.2 billion. Pushpay said it expects continued revenue growth as it executes on its strategy, improves efficiencies and increases its market share.
It said that its gross profit margin rose from 65% to 68%. Not only that, but as a percentage of operative revenue, total operating expenses improved by 12 percentage points from 50% to 38%.
The combination of fast revenue growth and slower expense growth saw earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) rose by 177% to US$26.7 million. The EBITDAF margin increased by 14 percentage points, up from 17% at 30 September 2019 to 31% at 30 September 2020.
Pushpay's net profit after tax (NPAT) grew by 107% to US$13.4 million and operating cash flow improved by 203% to US$27 million.
The ASX share recently increased its EBITDAF profit guidance to between US$54 million to US$58 million. This was an increase from guidance of US$50 million to US$54 million. The business is still aiming to reach US$1 billion of revenue in the future.
Is the Pushpay share price a buy?
Ben Griffiths from fund manager Eley Griffiths recently wrote:
"Over the last 12 months it has become clear PPH is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, PPH has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress). We believe the next few years for PPH will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash."
The Pro service still rates the Pushpay share price as a buy. Pro likes the cross-selling opportunity for new and existing customers. It also likes the US faith sector opportunity whilst also having the ability to expand to other markets such as non-faith organisations, as well as smaller churches. International growth could also be an option.
Pro finished its review of the HY21 result with these comments: "The management situation is something we need to keep an eye on, with more turnover at the executive and board level than we like to see. But the business itself appears to be firing on all cylinders and has further capacity to continue increasing its operating leverage."
