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Here’s why Nearmap Ltd shares soared 18% today

Shares in small-cap aerial imaging provider Nearmap Ltd (ASX: NEA) rose 18% to $0.84 cents this morning after the release of a positive first quarter update to the market. Although shares have been rising strongly in recent weeks, with the update seemingly much better than the market was expecting, Nearmap shares might head higher again in the near future.

Here’s what you need to know:

  • Group revenue rose 39% to $9.2 million in the first quarter of Financial Year 2017 (‘Q1 FY17’) compared to $6.6 million in the same quarter in 2016
  • This includes a 50% increase in US revenues from A$0.4 million in the final quarter of 2016 to A$0.6 million in the first quarter of 2017
  • Annualised Contract Value (‘ACV’) of the US sales grew 53% to US$2.3 million
  • Leads are ahead of target and conversion ratio of leads to sales is improving
  • Business growth appears to be primarily due to increased sales to existing customers, with some new customers such as OmniEarth and TomTom
  • Cash balance remains strong with A$10.9 million at 30 September 2016
  • A further update on progress to be provided at Annual General Meeting on 17 November 2016
source: Company presentations

source: Company presentations

Nearmap appears to be executing well and CEO Dr Rob Newman’s comments: “This quarterly result gives us growing confidence in both the size of the opportunity and our ability to compete“.

This may alleviate some investor fears about Nearmap’s ability to take market share from larger competitors. Management also noted that these results came in what is seasonally one of the quietest quarters, which may give the market confidence in 2017 being another year of growth for the company.

Investors should be cautious that the company’s US story is just getting started, although given the company’s success so far Nearmap does not appear to be expensive at today’s prices.

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Motley Fool contributor Sean O'Neill owns shares of Nearmap Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

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