The share price of aerial imagery business Nearmap Ltd (ASX: NEA) lost altitude today after the company provided a trading update at its AGM in Sydney.
The company sells up-to-date aerial imagery to the solar, construction and local government enterprises among others to help them manage business operations, while saving time and money.
Nearmap already has a successful business in Australia which the company estimates will deliver a revenue run rate of between $28 million to $32 million by the end of 2015. Management also suggested the sales growth outlook in Australia remains upbeat, with strong free cash flows thanks to high margins and relatively fixed costs.
However, it’s likely that some of today’s selling is because growth in the newly-entered North American market is not as strong as some investors had hoped. Nearmap today announced it has signed contracted revenue of US$500,000 in the region after announcing first sales were secured in May of this year.
The business only started up North American operations just over a year ago and if you allow a period of grace to get operationally moving in a vast market then today’s numbers are far from a disaster. Moreover, the shock exit of the last CEO now looks to be in the rear view mirror as the business claims to be assembling a team to deliver success in the US.
It’s also worth remembering the past counts for nothing in investing and with the business set to introduce its North American paywall this week revenue in North America may take off in a similar way it did in Australia.
At the AGM management suggested it will look to focus on the big-ticket accounts in specific industries in the US where it expects to gain traction, although it seems likely investors will need to remain patient unless the coming paywall equals digital pay dirt for today’s investors.
The business also flagged the possibility of one day entering other international markets, with Canada, France, Germany or the UK all potential markets among others.
Nearmap does have rivals in the US and one in Australia named SPOOKFISH FPO (ASX: SFI), although the company and its investors have always maintained that it’s success so far is due to a superior product offering. On this basis it looks a speculative buy at today’s price of 37 cents.
