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Nuvei Stock Crashed 23% After Q2 Earnings: Why I’d Buy More Today

·3 min read
Make a choice, path to success, sign
Make a choice, path to success, sign

Written by Jitendra Parashar at The Motley Fool Canada

Shares of Nuvei (TSX:NVEI)(NASDAQ:NVEI) tanked by as much as 23% in intraday trading Tuesday morning after its second-quarter results came out. While NVEI stock staged a recovery later during the session, it was still trading with more than 16% losses in the afternoon at $45.32 per share. By comparison, the TSX Composite Index fell by 0.4% in early trading, as Canadian investors continued to react to the ongoing corporate earnings.

Nuvei’s latest quarterly results seemingly failed to impress investors, triggering a sharp selloff in its stock. Nonetheless, I’d still buy the dip in its stock, as it looks really undervalued after today’s big crash. Before I explain why, let’s quickly take a look at some key highlights from its latest quarterly earnings report.

Nuvei stock crashed after the Q2 earnings release

In the second quarter (Q2), Nuvei reported an 18.6% YoY (year-over-year) rise in its total revenue to US$211.3 million — slightly less than analysts’ estimate of around US$220.7 million. With this, the Canadian payment technology company registered a 15.9% YoY increase in its adjusted earnings to US$0.51 per share, exceeding Street analysts’ estimate of around US$0.47 per share.

Based on these financial figures, today’s massive selloff in NVEI stock could partly be attributed to its Q2 revenue miss. However, that’s not the only reason. After posting lower-than-expected revenue in the second quarter, the tech company also slightly lowered its full-year 2022 outlook, which might have accelerated the selloff in its stock today.

Key reasons that hurt its Q2 financials

While it’s true that Nuvei’s second-quarter revenue fell short of analysts’ estimates, despite posting strong YoY growth, it’s important for investors to understand why its revenue missed expectations.

Despite consistently growing demand for its innovative payment technology solutions, the company cited unfavourable foreign currency exchange rates as the main reason hurting its revenue in the last quarter. In addition, Nuvei management also highlighted volatility in digital assets and cryptocurrencies and global economic uncertainties for its decision to adjust the full-year outlook.

Why I’d buy more

Interestingly, Nuvei’s total revenue in the last quarter actually grew by 24% YoY to around US$220.7 million at constant currency. That’s why I wouldn’t blame Nuvei’s business model or its management for external factors like unfavourable currency price movement. It’s also important to note that this factor is temporary, as the foreign currency exchange rates may go either way.

Similarly, you can’t expect a tech firm like Nuvei to control other external macro factors like cryptocurrency market volatility and global economic uncertainties. While these factors might slightly trim Nuvei’s profitability in the short term, they are very likely to have any major impact on its long-term growth outlook.

Foolish bottom line

Today’s crash in Nuvei stock clearly reflects investors’ fears that some macro uncertainties are likely to hurt its financial growth in the coming years. In my opinion, as long as the demand for its industry-leading payment services solutions remains strong, these factors shouldn’t hurt its long-term growth outlook. Given that, today’s selloff in NVEI stock has made it look really undervalued, making it attractive for long-term investors to buy at a big bargain.

The post Nuvei Stock Crashed 23% After Q2 Earnings: Why I’d Buy More Today appeared first on The Motley Fool Canada.

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

2022