Top broker tips Catapult (ASX:CAT) share price to race 92% higher

Is it time to buy this tech share?

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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.

Motley Fool contributor 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 and has recommended Catapult Group International Ltd. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. 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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