The Catapult Group International Ltd (ASX: CAT) share price was out of form on Thursday.
The sports analytics and wearables company’s shares dropped 6% to $1.56.
Why did the Catapult share price tumble?
The Catapult share price dropped following the release of its half year results.
This was despite the company reporting a 13% increase in revenue to $37.5 million for the half. This was driven by 29% growth in subscription revenue, which reflects Catapult’s strategic shift to a focus on high quality recurring revenue SaaS deals.
Other positives that the market appears to have overlooked were a 43% increase in Annual Contracted Value (ACV) and an ultra-low churn rate of 4.1%.
Instead, investors seem to have focused on the company’s EBITDA, which declined year on year to $1 million. However, this was the result of its transition from capital to subscription deals.
Is the pullback a buying opportunity?
One leading broker that appears to see the weakness in the Catapult share price as a buying opportunity is Jefferies.
This week the broker initiated coverage on the company with a buy rating and $3.00 price target. Based on the current Catapult share price, this implies potential upside of approximately 92% over the next 12 months.
Jefferies believes the market is under-appreciating the company’s significant growth opportunity. The broker also feels that a 3x revenue multiple makes its shares very cheap currently.
It commented: “Consistent customer growth & a large cross-sell opportunity is being underappreciated. A runway for growth exists for a minimum of 5+ years & SBG could be sold into >1,600 CAT soccer customers.”
“Our PT is based on the shares re-rating to comp multiples (6x revenue) as confidence improves &, if growth accelerates, this could be 10x. We estimate that the valuation implies a <20% chance of success in monetising the vast dataset. Initiate at Buy. PT $3.00,” Jefferies added.