During the NEA conference call on 21st April 2020 associated with their Covid-19 Business Update, NEA indicated that they would provide a further update "at the end of May".
I am looking forward to this with optimism and recently added to my holdings. Just as the 10% ACV downgrade in late January, the higher levels of growth investment (and therefore a hit on cash flows) and the developing coronavirus fears caused a big drop in share price, I expect the next update to do the opposite. My reasons for this are:
The 21st April market update indicated no material change in operating conditions caused by the coronavirus. Importantly, there was no change to the revised guidance for ACV given in January.
Assuming the next update in late May keeps guidance unchanged, or narrows the band, this implies an ACV growth rate of around 32% in North America and around 10% in ANZ (based on my assumed ACV split of $64M and $41M for ANZ and NA for a total ACV of $105M). There is a real chance that NEA could exceed this.
NEA has already guided only four weeks ago that it would be cash flow positive by June 2020 by better targeting growth expenditure and reducing costs. This is unlikely to change over such a short period, and if confirmed, should be very well received.
NEA Price at posting:
$1.56 Sentiment: Buy Disclosure: Held
