Matterport, a California-based tech company specializing in creating 3D spaces, is scheduled to go public by merging with a blank-check company called Gore Holdings VI (NASDAQ:GHVI). What is Matterport's stock forecast after the GHVI merger date?
GHVI shares have fallen by more than 42 percent since its stock hit a peak in mid-February when the shares were trading at $24.46. Now, at $14.04 per share, are investors’ return prospects better in the pre-merger SPAC investment?
When is the GHVI-Matterport merger?
In February 2021, GHVI and Matterport announced their merger. While a definitive date hasn't been set, the transaction is expected to close sometime in the second quarter of 2021. However, some SPAC mergers have got delayed lately, including the IPOE and SoFi merger. The SEC updated its guidance about the accounting treatment of SPAC warrants.
GHVI has filed an amended S4 with the SEC. Going by the standard timeline, the merger should be four to five weeks out. So, Matterport should start trading under the ticker symbol "MTTR" in early July if everything goes according to the schedule.
GHVI-Matterport merger is confirmed
The GHVI and Matterport merger is confirmed, while a shareholder vote ultimately approves the merger. However, SPACs are made for the sole purpose of acquiring another company and shareholders don't usually reject the merger.
Matterport stock forecast
Matterport’s growth is pinned by the digitization trend in real estate, which accelerated during the COVID-19 pandemic. Digitization is still expected to continue after the pandemic ends. The company is positioning itself to become the digital platform for the built world similar to the way Zoom, Netflix, and PayPal have changed the way we communicate, interact with content, and pay.
Matterport estimates that its addressable market is more than $240 billion with about 4 billion buildings with 20 billion spaces worldwide. The company has strong growth in this area. It reported growth in subscribers of 18x to 250,000 in 2020. One of the other key things in favor of Matterport is that nearly 64 percent of its revenues are recurring.
Through Matterport's subscription mix, it expects the recurring revenues to rise over time from 53 percent in 2020 to nearly 86 percent in 2025. It generates these revenues through cloud-based subscriptions for hosting clients’ virtual tours on its servers. In line with growth in subscribers, Matterport’s revenues also rose by 87 percent to nearly $86 million. Due to growing recurring revenues, its gross margins are also expected to rise to 73 percent in 2025 from 56 percent in 2020.
If Matterport is able to get close to achieving these projections, there could be a strong growth potential for the stock.
Is Matterport stock expected to go up after the merger?
After GHVI and Matterport announced the proposed merger, GHVI stock rose by 128 percent within a few days. However, the market rotation from growth to value amid rising bond yields and investors’ disdain for speculative instruments, including SPACs, hit GHVI hard. Since then, the stock has dropped by 43 percent.
However, even after this drop, GHVI stock is still trading at a nearly 40 percent premium to its IPO price. Lately, many SPACs have declined after they merged with the target entity. So, it's difficult to say which way the stock will move immediately after the merger. In the medium to long term, the stock should trade on Matterport’s fundamentals, which seem to be bright.
Based on GHVI’s current price, Matterport has an EV of $3.17 billion. According to the company’s own projections, its revenues should be $202 million and $323 million by 2022 and 2023, respectively. This gives it an EV-to-revenue multiple of 15.7x and 9.8x for 2022 and 2023, respectively. These multiples certainly look high. However, given the company’s first-mover advantage, sticky revenues, and large addressable market, some of the premium is justified.