AvePoint shares pop as Goldman Sachs initiates coverage with Buy Rating

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    It’s been less than a month AvePoint (NASDAQ: AVPT) has completed its merger with Apex Technology Acquisition Company (SPAC) and the enterprise software specialist is now receiving an optimistic introduction from Wall Street.

    Goldman Sachs (NYSE: GS) started AvePoint with a buy rating alongside a price target of $ 17, a whopping 68% increase from Tuesday’s closing price.

    As of 12:15 p.m. EDT, AvePoint stock rose 13%. That’s why Goldman Sachs likes AvePoint.

    Ride on Microsoft’s skirts

    AvePoint is a Software-as-a-Service (SaaS) company specializing in data management solutions for business organizations that Microsoft (NASDAQ: MSFT) 365. The COVID-19 pandemic has accelerated the rate at which businesses are making digital transformations, which represents an opportunity for AvePoint (and Microsoft).

    “AvePoint is a leader in enterprise data migration, enabling seamless and secure migration of data from legacy on-premise systems to cloud ecosystems with a focus on Microsoft cloud,” wrote Brian Essex, Goldman Sachs analyst, in a research note to investors. “AvePoint’s solutions also enable data governance and secure collaboration between corporate users.”

    While many SPAC targets are pre-revenue speculative startups, AvePoint is relatively less risky as it had $ 151.5 million in revenue in 2020, Essex notes. Annual Recurring Revenue (ARR) also rose 33% in the first quarter, AvePoint announced ahead of the closing of the de-SPAC transaction.

    The company forecasts sales of $ 257 million in 2022, with growth being driven by expanding its customer base while aggressively targeting small and medium-sized enterprises (SMBs) and serving specific industries.

    AvePoint estimates that only 3% of Microsoft’s cloud customer base use AvePoint, which suggests that it has many benefits as 250 million Microsoft customers need to be tracked.

    SPAC mood remains weak

    After an unprecedented SPAC boom in 2020, investor sentiment towards blank check companies has cooled significantly in 2021 amid valuation concerns and tightened regulatory scrutiny.

    Recent SEC action against Stable road procurement (NASDAQ: SRAC) regarding a lack of due diligence in relation to its target Momentus has also contributed to broadening investor skepticism about SPACs as an asset class.

    SPAC shares rose after the definitive agreements (DAs) were announced, but these days, many SPAC share prices stay near their net asset value (NAV) of $ 10. Even after the merger closed, AvePoint closed at just $ 10.12 on Tuesday.

    Essex believes the market is not fully recognizing AvePoint’s potential, suggesting that the company “went relatively undiscovered” after De-SPAC. The analyst suggests that AvePoint is reasonably valued given its growth potential. Goldman Sachs anticipates an average annual growth rate (CAGR) of over 30% through 2023.

    “We believe that the accelerated pace of digital transformation caused by COVID-19 coupled with the rampant adoption of Office 365 will continue to serve as a secular tailwind for AvePoint,” added Essex.

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