Is the Nearmap Ltd (ASX: NEA) share price great value after recent weakness? Here’s what this broker thinks of the company…
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The Nearmap Ltd (ASX: NEA) share price was out of form on Thursday and dropped notably lower.
The aerial imagery technology and location data company’s shares dropped over 3% to $2.40.
Why did the Nearmap share price drop lower?
Investors were selling the company’s shares yesterday after the release of an update on its guidance for FY 2021 at its annual general meeting.
Nearmap has provided guidance for annualised contract value (ACV) of between $120 million and $128 million this year. This represents an increase of 12.8% to 20% on FY 2020’s ACV of $106.4 million. Management advised that this forecast is based on constant currency and does not factor in any unforeseen circumstances.
The high end of its guidance range is just inside its medium to long term ACV growth target of 20% to 40% per annum.
How does this guidance compare to expectations?
According to a note out of Goldman Sachs, its analysts were forecasting FY 2021 ACV of $122.7 million, which represents annual growth of 15%.
The broker commented: “NEA has provided ACV guidance for FY21, between A$120mn to A$128mn which implies +13% to +20% YoY growth on a constant currency basis. Our published FY21E ACV forecast of A$122.7mn (+15% YoY) is within this range (and on constant currency basis our forecast would be A$126.7mn).”
“While this growth rate remains below the company’s medium-to-long term target of +20-40% YoY ACV growth, the company reiterated it expects accelerated ACV growth from FY22,” it added.
Is the Nearmap share price in the buy zone?
Goldman Sachs has retained its neutral rating following this update. Though, it is worth noting that the broker’s price target is materially higher than where the Nearmap share price is currently trading.
Its analysts have a $2.95 price target on the company’s shares, which implies potential upside of almost 23% for its shares over the next 12 months.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.