This ASX tech stock has seldom been short of drama this year.
The share price of Catapult Sports Ltd (ASX: CAT) was up more than 110% at one point this year, then sliding 23% over the past month before bouncing back at the start of this week with a 3% gain.
At the time of writing, the ASX tech stock changes hand at $4.61 apiece, a loss of 2.2%.
Image source: Getty Images
Growing pains
The sharp moves reflect both the promise and growing pains of a company still trying to turn global presence into consistent commercial momentum. However, behind the volatile ASX tech stock is a business that is quietly gaining traction.
This Melbourne-based ASX tech stock is best known for its wearable GPS performance trackers and analytics platforms used by elite teams worldwide. It has been steadily expanding its footprint across the US, Europe, and major leagues, like the NBA, Premier League, and top rugby competitions.
Global penetration
Catapult has reached a level of global market penetration that few Australian firms in the tech sector have achieved. The sports tech company snapped up Perch, a specialist business in strength-training technology, and recently took over Impect GmbH, a German analytics provider focused on elite soccer scouting and analysis.
The acquisitions align well with Catapult's long-term vision of becoming the global platform of choice for professional sports teams. They strengthen the product portfolio of the ASX tech stock and deepen its data capabilities.
Robust contracts, fear of dilution
Beneath the share price turbulence, the fundamentals of the ASX tech stock remain robust. In its latest half-year results update, Catapult reported annualised contract value of US$115.8 million, a 19% lift compared to the year before.
The average value per contract per team also continues to rise, and the company reports that customers now typically stay with Catapult for nearly 8 years.
Despite healthy underlying metrics, the recent equity raising and acquisition have stoked fear of dilution and integration risk. Some investors remain cautious because the pay-off from such acquisitions, especially in software-heavy, high-growth companies, can take time to materialize.
The broader tech sell-off also dampened sentiment toward high-growth, speculative names like Catapult. This prompted some investors to cash their profits.
Bullish outlook
Analysts seem overwhelmingly bullish on the ASX tech stock. They forecast an average 12-month target of $6.96, which suggests a 51% upside at the current share price.
Bell Potter likes Catapult Sports because of its strong recurring revenue, the acquisitions of Perch and Impect, and the attractive valuation.
The broker highlighted:
Importantly, CAT is now consistently generating positive EBITDA and FCF, marking a clear shift in the maturity of the business and supporting greater operating leverage as subscription revenue scales. Following a recent share price pullback, the stock screens more attractively relative to its growth outlook, and we see scope for a re-rate as management sustains cash generation and continues to capitalise on the significant under penetration of wearables and analytics across elite sport.
