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Down 20% in 2022, is the Pushpay (ASX:PPH) share price a clear buy?

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The Pushpay Holdings Ltd (ASX: PPH) share price has dropped over 20% since the beginning of 2022.

Looking further back, it has sunk even further. The past six months show a decline of almost 50%.

This ASX tech share offers churches a number of useful tools relating to electronic donations and church management.

It’s not too long until investors get an insight into the company’s full-year result, but the market gained a number of insights in the half-year result a few months ago.

Digital giving is here to stay?

During COVID-19, the company experienced a significant increase in the number of people donating electronically in the era of social distancing and lockdowns.

Pushpay provided the tools that churches needed to stay connected with their congregations.

But what about when the US started opening up?

When the company announced its result for the first six months of FY22 it said that it “has not seen any material change in digital giving reverting to non-digital means” and that could mean that customers in the US faith sector “may have undergone a fundamental technological shift as a result of the current environment”.

Pushpay said that digital giving and engagement is now a mission-critical factor within a church’s engagement strategy.

Increasing payment volumes and profitability

Despite the HY22 slowdown of growth compared to prior recent results, Pushpay continued to see growth of the business.

For the first six months of its financial year it said that payment volumes were up by 9% to US$3.5 billion. It’s expecting continued growth over time.

The growth of its top line helped the company’s profit margins.

The ASX tech share reported that its gross profit increased from 68% to 69%.

Whilst there can be various impacts on the net profit after tax (NPAT) from year to year, Pushpay reported another big jump in profit. HY22 NPAT rose by 43% to US$19.1 million. Profit can be a key influence on the Pushpay share price.

Growth plans

Pushpay continues to work on its growth plans.

It wants to win more large and medium churches in its main customer base. The ASX tech share also hopes for more adoption of digital giving by people who attend those churches.

But a new focus is on winning a market share of 25% of the Catholic church management system and donor management system market over the next five years.

The Catholic Church also has connections with education institutions which could unlock more growth avenues.

Pushpay is keeping geographical expansion under consideration as well.

Is the Pushpay share price a buy?

There are a few different brokers that currently rate the business as a ‘hold’ or a similar rating like ‘neutral’.

Macquarie has a price target of NZ$1.70 on the business, though it was disappointed by the half-year growth slowdown. UBS has a price target of NZ$1.90. Ord Minnett has a price target of $1.90.

On Ord Minnett’s numbers, the Pushpay share price is valued at 16x FY23’s estimated earnings.

Source: Read More

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