The Nearmap Ltd (ASX: NEA) share price has soared more than 7% in today's trading session. At the time of writing, shares in Nearmap are trading for $2.82.
Why is the Nearmap share price flying?
The company has not released any announcement today that could serve as a catalyst for its share price action. Last week Nearmap announced a US$3.5 million asset acquisition of technology and intellectual property from Primitive LLC (Pushpin). Management are optimistic regarding the combination of Nearmap's 3D imaging and geometry extraction technology acquired from Pushpin.
Equity analysts from Morgan Stanley are also optimistic regarding Nearmap, retaining their overweight rating on the company with a $4.20 price target. According to analysts from the investment bank, the integration of newly acquired technology could generate stronger medium-term growth and revenue.
Nearmap also has a heavy short interest, with 11.1% of its share registry held in short positions. The surge in Nearmap's share price could reflect short sellers covering their position given the positive outlook for the company. The Nearmap share price raced to an all-time-high of $4.23 back in June and has been sold-off since.
What does Nearmap do?
Nearmap is an aerial imagery company that has operations in Australia, New Zealand and the US. Regarded by analysts as best in its class, Nearmap provides digital images from sophisticated cameras mounted on light aircraft. Images are taken from different angles and combined to create high-resolution landscapes, which are stored in an online library. Nearmap serves as a powerful project management tool and reduces the time required for site inspections and planning.
Strong half-year earnings
Earlier this year Nearmap reported impressive half-year earnings, which indicated healthy growth across the board. Highlights of the report included a 46% increase in revenue of $36.3 million and healthy earnings before interest, tax, depreciation and amortisation of $8.1 million. Despite Nearmap reporting a net loss of $1.97 million, down 70% from the year prior, the business is relatively debt free with positive operating cash flow.
Nearmap considers annualised contract value (ACV) a key metric for customer retention and growth. ACV for the half year grew 44% to $78.3 million indicating strong future revenues, increasing its operating leverage and the prospect of scalability. ACV in the US more than doubled from the previous year to $24.6 million, whilst Australian ACV grew to $53.3 million.
Global growth and expansion
Nearmap's improved performance in the US provided the market with great optimism over the company's future growth and profitability prospects. Nearmap plans to continue expanding its US presence in the near future by expanding operations into more jurisdictions and focusing heavily on sales and marketing to gain market awareness. The company estimates that it has only penetrated 1% of the US market, which it forecasts to be worth approximately $2 billion by 2025.
More competition for Nearmap
Nearmap is also facing local competition after Morgans launched an IPO for aerial imagery and mapping business Aerometrex Ltd (ASX: AMX). Aerometrex is pitched as a mini version of Nearmap and listed on the ASX last week. Following an issue price of $1.00, the Aerometrex share price has surged and currently trading at $1.92.
