The Nearmap (ASX:NEA) share price is down 15% this month

The Nearmap (ASX: NEA) share price has been in the wars recently, falling heavily after a short-seller report and legal concerns in the US.

| More on:
asx share price fall represented by lady in striped tshirt making sad face against orange background

Image source: Getty Images

Niche ASX technology company Nearmap Ltd (ASX: NEA) has endured a pretty rough time in recent months. Since climbing as high as $3.22 in late August, its share price has slid all the way back down to just $1.80 as at the time of writing.

And the bloodshed shows no signs of abating – in just this month alone, the Nearmap share price has plunged more than 15% lower. The company’s shares are now getting worryingly close to the 52-week low of $1.50 they reached all the way back in May last year.

Company background

Nearmap is an aerial imagery company that provides up-to-date high resolution images and geospatial data to its business and government clients. Nearmap gives private companies and government agencies the ability to conduct virtual site visits without ever having to physically leave their offices.

This allows people working in fields like engineering, infrastructure development, mining and construction to plan and analyse complex projects.

Recent news

The most recent round of selloffs may have been sparked by Nearmap’s early May announcement that a complaint had been lodged against its American subsidiary in the US District Court in Utah. The complaint was filed on behalf of two companies, Eagle View Technologies and Pictometry International Corp, and alleges that the rooftop estimation technology used by Nearmap’s subsidiary, Nearmap US, infringes upon their copyright.

Nearmap’s announcement went to great lengths to stress that the allegations were “without merit” and didn’t relate to the company’s core proprietary technology. But the Nearmap share price still plunged on the news, dropping more than 20% on the day of the announcement.  

This extended a rough period for Nearmap. Back in February the company had to defend itself against a short seller report issued by J Capital Research – the same research firm that attacked ASX darling WiseTech Global Ltd (ASX: WTC) back in October, 2019.

However, there’s no doubting that the one-two punch of the short-seller report and now these legal concerns – even if neither have any merit – have made some shareholders nervous. This is particularly true in a market where growth shares are under increased pressure due to inflation fears.

Financials

The big question for investors now is whether Nearmap shares have been oversold on the news.

Just two days prior to announcing the allegations made against its subsidiary, Nearmap had upgraded its FY21 annual contract value (ACV) guidance. Based on its strong performance over the first half of the year, the company stated that it now expected full-year ACV to be in the range of $128 million to $132 million (up from its previously issued guidance of $120 million to $128 million).

This came after the company reported strong results for the first half of FY21, driven by record incremental ACV growth in its North American portfolio. Total ACV increased by 21% over the prior comparative period to $112.2 million, while group statutory revenue jumped 18% to $54.7 million.

While some uncertainty remains around the copyright allegations made against Nearmap, the company’s own outlook for the remainder of the financial year clearly remains bullish.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Rhys Brock owns shares of Nearmap Ltd. and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and WiseTech Global. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares