The Pushpay (ASX:PPH) share price jumped 80% in 2020: Can it go higher?

The Pushpay Holdings Ltd (ASX:PPH) share price was on fire on 2020 and has been tipped for further strong gains in 2021…

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The Pushpay Holdings Ltd (ASX: PPH) share price was on form again in 2020 and surged notably higher.

Over the 12 months, the donor management and community engagement platform provider’s shares were up a sizeable 81%.

Why did the Pushpay share price jump 80% higher in 2020?

Investors were buying Pushpay’s shares in 2020 after it delivered exceptionally strong revenue and earnings growth despite the pandemic.

In FY 2020, the company reported a 33% increase in operating revenue to US$127.5 million. This was driven by a 39% increase in total processing volume to US$5 billion, a 42% lift in customer numbers to 10,896, and flat average revenue per user of US$1,317 per month.

While this growth was clearly very strong, it was nothing compared to its earnings growth thanks to the achievement of further operating leverage.

During the 12 months, Pushpay’s operating expenses only grew 5%. As a result, as a percentage of revenue, its operating expenses reduced from 65% to 52%.

This led a massive 1,506% increase in earnings before interest, tax, depreciation, amortisation and foreign currency gains/losses (EBITDAF) to US$25.1 million.

Pushpay’s strong form continues.

Also giving its shares a boost was the company’s half year results and guidance for FY 2021.

For the six months ended 30 September, Pushpay delivered a 48% increase in total processing volume to US$3.2 billion and a 53% increase in operating revenue to US$85.6 million.

Once again, the company delivered further operating leverage, reducing its operating expenses as a percentage of revenue to 38%.

This underpinned a 177% increase in half year EBITDAF to US$26.7 million. This was more than the entire EBITDAF it achieved in FY 2020.

Looking ahead, more of the same is expected in the second half. Management has provided fully year FY 2021 EBITDAF guidance of between US$54 million and US$58 million. This will be up 115% to 131% year on year.

Can the Pushpay share price go higher?

Analysts at Goldman Sachs believe the Pushpay share price can continue its ascent in 2021.

It currently has a conviction buy rating and ~$2.59 price target on its shares. This compares to the current Pushpay share price of $1.71.

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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 PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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