NexTech AR is riding augmented reality ecommerce boom, Singular Research says as it initiates coverage with 'Buy-Venture' rating

NOV 14, 2022

NexTech AR Solutions Corp presents an augmented reality and metaverse investment opportunity, as the company is building a niche in the ecommerce market with its 3D modeling initiatives, according to US-based broker Singular Research.

Along with the ‘Buy-Venture’ rating, the analysts issued a 12-month price target of $1.50, 9.5 times the 2023 enterprise value-to-revenue rating.

Toronto-based Nextech acquires, develops and sells augmented reality (AR) tech, offering a number of platforms, including ARway (CSE:ARWY), a Unity-based platform that uses AI to scan and recognize surroundings for 3D spatial mapping. Another end-to-end AR platform, ARitize 3D for Commerce, enables users to embed a 3D model in a product page on websites. Others are focused on social media, architecture, holograms, and event hosting.

READ: Nextech AR Solutions reports "3D model mega trend" in preview of big things to come

“The company’s applications/platforms under the NexTech Metaverse Suite/AR umbrella are uniquely suited to cater the ecommerce market and thereby help its clients keep pace with the evolving needs of current retail end-consumers,” the analysts wrote in a report.

Product sales from ecommerce formed the bulk of NexTech’s revenues, with total revenue up from $20,000 in 2018 to $25.93 million in 2021. The brokers project NexTech’s revenue to hit $378 million by 2026, with an overall company value of $284 million. The brokers also forecast that NexTech will have a $250 billion per year portion of the $5 trillion per year ecommerce market.

NexTech recently spun off ARway (CSE:ARWY) as a separately traded company, hoping for a higher valuation for this niche technology, according to the broker, adding the spinout will provide a stock dividend of four million shares for NexTech shareholders.

“NexTech will be able to save about $1.2 million per year in operating expenses by spinning off ARway (CSE:ARWY). Furthermore, we believe the spin-off will help ARWay’s management to exclusively focus on the Indoor Positioning and Navigation (IPIN) segment of the AR market and thereby position itself to dominate this market. The Indoor Positioning and Navigation market is currently estimated to be around $11 billion per year and is projected to grow at a compound annual growth rate of 42%,” the brokers wrote.

NexTech’s AR technology is key to ecommerce players supporting customer demands, with virtual reality a boon to selling items such as furniture and high-end luxury goods, according to Singular Research.

“NexTech’s offerings deliver higher click-through rates, thereby increasing conversion rates of online shopping transactions and substantially decreasing return rates. Similarly, the company’s offerings increase engagement of new customers, which is especially important for adoption and penetration of new products,” the brokers wrote, adding the company currently has over 100 customers.

Among those are Target, Pier 1, NAPA, Kohl’s, Amazon, Sears, and Kmart, the brokers wrote, adding NexTech platforms are compatible with SalesForce, Shopify, Oracle, and Google Ads, among others.

“(Third quarter 2022) has become a milestone in the company’s corporate journey – by landing Amazon as a customer,” analysts at Singular wrote. “Beginning in 3Q, Amazon is expected to start contributing to the Renewable Software Licenses revenue stream.

"In fact, with about $200,000 in revenues as its first quarterly contribution the Amazon revenue stream would add materially to the company’s top-line and quite substantially to its bottom-line.”

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