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Is the Pushpay (ASX:PPH) share price a buy at today’s levels?

growth in asx share price represented by multiple hands all placing coins in a piggy bank
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The Pushpay Holdings Ltd (ASX: PPH) share price is having a remarkable run in 2020, having risen by almost 125% since January. The question is, has it run out of gas or will the Pushpay share price continue its momentum?

First, what exactly does Pushpay do?

In short, Pushpay is a fintech player that offers donor management tools to religious organisations and non-profits. It also sells the Church Community Builder software, a subscription-based church management platform that enables management of various church activities.

Pushpay is therefore doing business in a very niche market. You may initially think of this as a small niche, but the market size in donation giving reached US$124 billion for 2018 in the US alone. I believe tipping and giving will always be part of the cultural norm in North America. For this reason, I think Pushpay’s business model will stand the test of time and continue to generate recurring revenues. 

Another interesting fact regarding Pushpay’s addressable market is that the faith sector has still not embraced the use of technology in a major way. Pushpay is positioning itself to close that gap by also offering a host of other apps that aim to increase an organisation’s membership. 

Pushpay is a first major mover in this space. Once a church signs up to the service, it becomes a deeply ingrained ecosystem for the organisation, making it inefficient for the church to withdraw from the service. This is another possible tailwind for Pushpay’s subscription revenue model going forward.

Pushpay’s latest financial position

In its last earnings report in June 2020, Pushpay announced a total revenue increase of 32% to US$128.8 million, while its customer base increased by 42% to reach 10,000. Considering there are more than 180,000 religious organisations in the US alone, one could argue that Pushpay has really only begun to scratch the surface when it comes to client acquisition. 

According to the June statement, the total payment volume processed through Pushpay’s system was US$5 billion. Whilst this appears to be a significant amount, when you consider the entire giving market in the US, it only represents a 4% slice of that pie. To me, this indicates there is still a long growth runway there.

So is the Pushpay share price a buy?

Overall, I believe today’s Pushpay share price represents a solid, long-term play. The company’s recurring revenue model is stable, and should only increase as Pushpay adds more products to its suite of solutions.

In terms of the client base, Pushpay has still only acquired a fraction of the market. I believe there is still a massive opportunity for the company to expand into other religious denominations and non-profits, as well as to markets beyond the US, where 98% of its revenue currently comes from.  

The world is moving toward a cashless society and I believe that donations will also move in this direction.

As mentioned, the Pushpay share price has more than doubled this year. I feel there are two issues potential investors need to consider before making a decision to buy Pushpay shares. Firstly, Pushpay will release an interim results announcement on 4 November which is likely to provide greater insight into the company’s performance. Secondly, it could be prudent to wait for a slight pullback in the Pushpay share price to avoid the recent hubris gripping technology stocks. Having said that, I still believe Pushpay is a good buy-and-hold share with the potential to pay handsomely in the long term.

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dsunarto has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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.

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