H.C. WAINWRIGHT & CO Initiating Coverage of 3D Metaverse Technology Company with BUY RATING: NEXCF

March 18, 2022 -- InvestorsHub NewsWire -- via Atlas --

NexTech AR Solutions Corp. (NEXCF) Rating: Buy

Scott Buck 212-856-5730 sbuck@hcwresearch.com

Initiating Coverage

Technology

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Accelerating Revenue Growth and Path to Profitability Make for an Attractive Metaverse Play; Initiating at Buy; $2.50 PT

Transitioning business model positions company for shift in the digital ecosystem. We are initiating coverage of NexTech AR Solutions Corp. with a Buy rating and a 12-month price target of $2.50 per share. Headquartered in Toronto, Canada, the company is positioning itself to become a leading provider of 3D models and augmented reality solutions to the e-commerce industry. The shift from legacy retail and virtual event hosting, which represents almost 80.0% of revenue today, to software and technology solutions should drive meaningful revenue growth, margin expansion, and a re-rating of NEXCF shares, consistent with other small capitalization software companies. As scale begins to improve in 2023 and beyond, we expect revenue growth and margin expansion to drive significant operating leverage and a path to quarterly profitability as early as 2023. As the company demonstrates its ability to execute on this profitable growth strategy, we believe NEXCF shares should begin to move towards, our $2.50 price target. Technology stack built to scale, a meaningful differentiator versus peers.

Through a combination of in-house development and acquisitions, the company has developed a high-quality 3D modeling product, driven by artificial intelligence at a USD$6 to USD$10 price point, compared to as much as USD$250 for some peers. This should accelerate customer growth, scaling the business quickly. Using 2D photographs, or CAD files, NexTech customers can create 3D models on their desktops or even mobile devices and integrate those 3D models onto their online merchant websites. The near immediacy of model creation and a meaningfully lower price point versus peers make the products attractive for retailers of all sizes. Further, the company has created several complementary products using augmented reality which further enhance the consumer experience creating value for the merchant. This includes animations, holograms, exploded views, and utilization within a 3D virtual experience.

The interconnection across the technology stack allows customers to create unique user experiences driving customer education, product sales, and reduce costly returns. New e-commerce partnerships expected to meaningfully accelerate revenue growth into 2023. In January 2022, the company launched its 3D modeling product within e-commerce platform Shopify’s merchant application. This allows 1.7M Shopify merchants to access 3D modeling and AR capabilities with a single click. A similar partnership was launched with SHOPLINE, Asia’s largest smart commerce platform in February 2022. In total, we believe there are approximately 16.0M ecommerce stores worldwide representing as many as 400.0M SKUs that would benefit from 3D modeling. The company believes between 3D models and enhancing technologies the total addressable market more than USD$100.0B annually. We believe these distribution partnerships should serve as a meaningful driver of revenue growth as the benefits of 3D modeling, including higher sales conversion rates and lower rates of product return, should be viewed attractively by merchants of all sizes. At the current price point, USD$10 per model, per month, even smaller merchants should recognize a meaningful ROI on the addition of 3D modeling and AR capabilities. Further, direct integration with e-commerce platforms should serve as barrier to entry for potential competition. As more retailers opt-in, we expect NexTech revenue to accelerate meaningfully beginning in 2H22 and continue into 2023.

SOURCE: Atlas

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