Special purpose acquisition company (SPAC) Apex Technology Acquisition (NASDAQ:APXT) stock is back on the upswing.
Apex is set to merge with AvePoint later this year.
AvePoint, in turn, offers cloud services in the data storage and security arena.
APXT stock ended up in the same SPAC slump that afflicted so many other companies this spring.
As traders turned elsewhere, SPACs crashed and burned. The majority of them, including Apex, fell back to the $10 SPAC floor. However, summer has been kinder to the SPACs in general, and APXT stock in particular.
Why APXT Stock Is Back on the Upswing
Last fall, APXT stock jumped from $10 to $15 following the announcement of its deal to merge with AvePoint. This made sense.
At that point, the market really liked SPACs, and it was also enthusiastic for software offerings. AvePoint checked a lot of the right boxes.
However, the market has gotten more picky this year, and that’s caused a setback for APXT stock.
For one, the deal has taken a long time to close (it was announced back in November 2020 after all). Given the general decline in interest in SPACs, having this deal take forever to close hasn’t boosted sentiment.
Now, though, we’re drawing closer to when this finally gets done. SPACs have a tendency to pop when they change to their new name and ticker symbol so traders may be getting in ahead of that.
For another thing, software and tech stocks are performing a little better over the last month. Tech had trailed the rest of the market for much of 2021.
However, it seems the reopening trade is finally losing some steam, and that may create a chance for software names like AvePoint to regain market leadership.
Solid Fundamentals, but a Questionable Market
AvePoint’s core business is in helping businesses migrate from existing data storage systems to the cloud. Primarily, AvePoint focuses on data for Microsoft (NASDAQ:MSFT) products such as Microsoft Office and 365.
AvePoint’s list of customers is amazing; it has a ton of Fortune 500 clients.
The company is also already close to breakeven on an operating income basis, and has shown steady growth in recent years. With Microsoft’s 365 business continuing to prosper, AvePoint should have more steady revenue growth ahead of it.
There is one point of concern, however. Despite having a flashy list of clients, AvePoint is only doing around $200 million a year in revenues.
That’s troubling since it already has reached so much of its potential market judging by its star-studded client list. After all, 25% or 30% revenue growth on a $200 million base providing ancillary services to Microsoft 365 can only get you so far.
In other words, this looks like a fine enough niche business, but this probably isn’t the next huge software-as-a-service (SaaS) giant in the making unless it makes notable M&A deals.
APXT Stock Verdict
When I last covered APXT stock, I suggested it looked good for a trade.
As I noted, the stock couldn’t realistically drop below $10/share due to the SPAC structure. As is usually the case with SPACs, if investors don’t like a deal, they can simply redeem their shares and get $10 of cash back per share.
Meanwhile, if the market ever warmed up to AvePoint’s business, APXT stock could see considerable upside.
That’s now happening. No one would suggest that this thing is trading like a meme stock, but it is starting to gain considerable momentum, with a steady measured climb higher.
Since May, shares have moved from that $10 floor back to $12.50. With the merger with AvePoint nearing fruition, this acceleration could continue.
In due time, APXT will become AvePoint and investors will have what’s essentially a pureplay on cloud services for Microsoft products.
Now the question turns from getting the SPAC deal done to broadening the overall addressable market. AvePoint’s total revenue numbers and profit margins are a little light compared to the average SaaS company.
Still, that’s a matter for another time. For now, AvePoint is shaking off the SPAC blues and preparing for brighter days ahead.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.