The Nearmap Ltd (ASX: NEA) share price is up 32% in August, after its shares gained another 12% in today’s trading.
The rally is enough to put Nearmap’s share price up 20% year-to-date. And shareholders who bought at the 25 March low, following the COVID-19 driven ASX rout, would be sitting on a gain of 250% today.
By contrast, the S&P/ASX 200 Index (ASX: XJO) is down 8% for the calendar year and up 35% from its March lows.
What does Nearmap do?
Founded in Perth in 1998 in Perth, the company provides high resolution aerial imagery technology and location data for companies and government customers across Australia, the United States, Canada and New Zealand. Its technology enables clients to conduct virtual site visits rather than having to fly to and over site locations in person.
Nearmap shares listed on the ASX in 2000.
Why is the Nearmap share price up 32% in August?
Nearmap’s 32% share price leap in August comes despite an almost 16% intraday share price drop last Wednesday 19 June after the company released its FY20 results. Shares closed the day down 10%.
Investors hitting the sell button likely were focusing on some of the negatives in the report. Those details included the fact that the cash balance of $33.8 million for the financial year was down from $75.9 million on the previous year. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) also fell, down to $9.1 million from $15.5 million in FY2019.
However, as Nearmap CEO Dr Rob Newman pointed out, the company maintained its forward guidance — reset in February after some of its North American customers were shut down — despite the coronavirus pandemic. “That’s a really good indicator that our business has been strong and resilient through this more challenging period,” he said.
The market may also be re-evaluating the high barriers to entry that any would-be competitors have if they wish to challenge Nearmap in the field of aerial imagery. Dr Newman says:
What other companies still take months to do, we do in days. … And now we have our 3D and AI. There is no other company in the aerial imagery space that would do that complete vertical integration on the scale we do. We do it for 80 million properties across the world.
Investors have clearly had time to digest and rethink their positions since the company released its results. The Nearmap share price is up 28% since last Wednesday’s closing bell.
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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