As Apex Technology Acquisition (NASDAQ:APXT) approaches its $10 per share SPAC offering price, it’s starting to look cheap. In fact, APXT stock may be too cheap to ignore at this level.
In many cases, I think the collective baby is being thrown out with the bathwater among some SPACs today. these venture capital vehicles (which is really what they are) help early-stage companies come to market sooner than they otherwise might via a traditional IPO. And often, that means companies that shouldn’t be going public or are going public too early are coming to the markets via SPACs.
However, in the case of AvePoint, the announced merger target of Apex, nothing could be further from the truth. AvePoint is an established software-as-a-service (SaaS) business with a long-standing partnership with Microsoft (NASDAQ:MSFT). This partnership provides AvePoint investors with extremely steady recurring cash flows. These sorts of high-quality recurring revenues receive a premium in the marketplace for a reason. Accordingly, there’s a growing number of investors who are starting to see some pretty decent value in APXT stock today.
Interest in SPACs has been waning recently. A recent report from Barrons indicates that the premiums associated with SPACs have declined substantially. Since early March, the premium investors were willing to pay for SPACs dropped from 27% to less than 4% at the end of last month. That’s a large decline.
For investors willing to be a bit contrarian and pick up some high-quality growth stocks that have been unfairly beaten up by the market, now is the time. Here’s more on why I think Apex Technologies is one such stock to consider today.
The Valuation of APXT Stock Appears Attractive Compared to Its High-Growth Peers
According to AvePoint’s November investor presentation, the company’s financials look quite attractive for long-term growth investors.
A 30% ARR growth rate, a 14% EBIT margin, and fresh capital to invest in its own growth are three pillars of the company’s 2020 performance that AvePoint’s management team would like investors to focus on. Indeed, these factors are enticing high-level stats which any growth investor will like to see.
On a forward-looking basis, AvePoint is valued at roughly 7.5-times its sales. That’s not cheap, but that’s not extremely expensive for a company with a recurring revenue business model such as AvePoint’s. I think investors who would have bought into Apex Technologies at the $17 level should certainly like this stock below $11 per share.
The stock market has been called the only market where buyers don’t want to shop in the bargain aisle. In today’s momentum-driven market, this appears to hold true more than ever.
Indeed, the incredible shift from euphoria to fear among SPACs today has provided some intriguing buying opportunities for value investors. I certainly wouldn’t put AvePoint in the value bucket quite yet. That said, I would classify APXT stock as a growth-at-a-reasonable-price play today.
AvePoint’s SaaS business model, its impressive growth rate, and its huge total available market of $33 billion suggest the runway for this stock is sufficiently long to support decades of additional growth at this rate. For investors seeking high-quality growth at what appears to be a reasonable price, this particular SPAC is a good name to consider.
How AvePoint performs after its merger remains to be seen. I do think the market will be paying close attention to how this stock performs in its first few quarters as a publicly-traded entity. That said, if AvePoint’s results exceed expectations, I’d expect investors could see the $17 level once again, in short order. We’re still in a market that favors growth investors. Until that changes, companies like AvePoint should continue to do well.
Today I believe that the potential gains of APXT stock are much higher than its downside risk. The company has an attractive valuation relative to its SaaS peers. Indeed, AvePoint/Apex stock could be one of the best SPACs out there today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.