Has Pushpay blown its pandemic opportunity? Analysts give their verdict

New Pushpay chief executive Molly Matthews - the Kiwi-American company's first US-raised CEO. Photo / File

Analysts are split on the meaning of new competition for Pushpay on the eve of its full-year earnings announcement.

The NZX-listed, Seattle-based maker of digital giving and church management software more than doubled its market cap to $2.3b during 2020, but the share price has eased back during 2021.

There has been a general pull-back for tech stocks recently, but with its customer growth slowing, Pushpay has also faced questions about new low-cost competitor Tithe.ly.

Forsyth Barr's Jamie Foulkes sees Tithe.ly as a clear and present danger, and recently downgraded Pushpay to underperform.

But in a May 5 note, Craigs Investment Partners' Stephen Ridgewell said investors should keep the faith. The Craigs analyst sees the Tithe.ly threat as over-egged - although he maintained a neutral position on valuation.

Who's right could be revealed tomorrow, when Pushpay reports its numbers for the year to March 31, 2021.

In the faith sector, like so many others, the pandemic accelerated digitisation. With no plate to pass during a real-life service, congregations who had reconvened on Zoom adopted Pushpay.

In his April 9 research note, Foulkes - a former Pushpay bull - seemed to have lost his faith in the company. The analyst, who downgraded the company to underperform, said it had blown its chance to capitalise on its market dominance during the pandemic.

"Instead, our recent research suggests that over the past twelve months Pushpay has lost significant ground to its competition, with Tithe.ly growing its churches by 12,000 [in the first half of FY2021] while Pushpay grew by 309."

Foulkes said the premium-price Pushpay was losing out to lower-cost opposition (Tithely is one third of the price), reducing its market share in large congregations from 58 per cent to 52 per cent over the year to March.

But citing rival statistics, Craigs' Ridgewell said while Tithe.ly is Pushpay's "highest profile and fast-growing competiton, it has not increased market share in large churches – indicating its growth is skewed to smaller churches not targeted by Pushpay."

Catholic opportunity?

Pushpay, which has made nearly all of its revenue so far from Protestant churches in the US, has recently said it sees Catholic congregations as an area for growth.

However, unlike when it began in the Protestant segment, Pushpay faces an incumbent in that market: the Nasdaq-listed Blackbaud. And Foulkes notes the situation is further complicated by the fact that a lot of Catholic giving is funnelled through Catholic schools.

But here, again, Ridgewell takes the opposite stance.

"Pushpay appears well-positioned to take share against weak competition in the space," he says.

However, Ridgewell also acknowledges that Catholic congregations, with total giving of around US$5.1 billion last year, are a "noticeably smaller target addressable market" than Protestant churches on around US$7.0b.

Pushpay shares have recently been on a slide against the background of the analyst debate over the Huljich family selling the remainder of their cornerstone stake, the company announcing its third CEO in 24 months as the Seattle-based Molly Matthews took the reins in an internal promotion, and a general tech sell-off.

In mid-afternoon trading today, shares were down 4.71 per cent to $1.61 for a market cap of $1.79b.

But Pushpay is still forecasting aggressive growth, and emphasising that it has moved well beyond its digital tithing roots with software that can manage communications and every facet of running a congregation.

Analysts will be looking for any revision of that outlook with tomorrow's briefing.