Apex Technology Acquisition Corp (NASDAQ:APXT), a SPAC (special purpose acquisition company) still hasn’t closed its merger with AvePoint. I wrote about this on March 24 and developed a model to value AvePoint. My price target for APXT stock was $15.34 (the new symbol will be AVPT). I still have this target price and in fact, have upgraded it to $16.19. This is 45.3% above yesterday’s price of $11.14.
One reason for my upgrade is the fact that AvePoint said in its April 14 Q1 earnings report it would buy $20 million of APXT stock. Given that its market capitalization is $479.49 million, the $20 million works out to 4.17% of its shares.
Needless to say, this will help APXT to close the merger with its shareholders. It also makes the company worth more. Here is how I calculated the new value for APXT stock.
What AvePoint (APXT Stock) Is Worth
The valuation method I used in my previous article was based on a multiple placed on sales forecasts for 2022 and 2023. The sales forecasts came from the company’s original SPAC deck presentation.
It also assumes that 199 million shares of APXT were outstanding. Now, with 4.17% few shares, there are 190.698 million outstanding.
Therefore, at 10.8 times its 2022 adjusted estimated sales of $262 million, the enterprise value will be $2.8296 billion. I used the 10.8 multiple since that is 90% of the 12 times average multiple of its peers as seen on page 29 of its slide deck.
Next, we add back $257 million in cash that will happen at the close of the merger. That brings its equity market value up to $3.0866 billion (i.e., $2.8296 billion added to $0.257 billion).
Therefore, if we divide $3.087 billion by the new lower amount of APXT shares (190.698 million), the resulting price target is $16.19. This is 45.3% higher than its present price of 11.14.
Moreover, the company now says that it has increased its sales forecast for 2021 to $194 million, up from $193 million. AvePoint did not say whether its forecast for 2022 sales was higher now as well. If it is, then the price target for APXT stock will be higher as well.
What To Do With APXT Stock
It’s a good thing that AvePoint wants to make sure that the deal goes through. So far, there has not been a date set for the closing. But the deal must be near to closing. Otherwise, AvePoint would not have been so confident about buying APXT stock.
Now, whether APVT stock will rise to $16.19 immediately after the closing is another issue. It could take up to another year or so, especially given that we don’t have clear guidance yet on whether sales will hit $262 million by 2022. Once AvePoint confirms these estimates and a few analyst reports emerge, expect to see AVPT stock rise 45.3% to 16.19 or higher.
Even if it took 2 years for this to occur, the average annual return would be 20.54% on a compounded basis. That is a good ROI for most investors.
And it doesn’t hurt that some of the stocks in AvePoint’s industry are doing well. For example, HubSpot (NYSE:HUBS) is up 26.96% year-to-date, Dynatrace (NYSE:DT) is up 23.85% year-to-date and Jamf Holding Corp (NASDAQ:JAMF) is up 14.22%. However, the industry is a mixed bag. Alteryx (NYSE:AYX) is down 34.64% year-to-date, and Five9 (NASDAQ:FIVN) is off 5.45% year-to-date.
So, my estimate that AvePoint (APXT stock) could rise 45% could take longer than expected. But the discrepancy between what it is worth and where it trades is still quite large. That means it is more likely than not that the stock is undervalued and likely to rise once the SPAC merger closes.
On the date of publication, Mark R. Hake did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.