Rover (ROVR) Stock Jumps on Debut—Will It Go Up More?

Rover (ROVR) went public on Aug. 2 through a reverse merger with the SPAC Nebula Caravel Acquisition (NEBC). Rover stock rose by more than 6 percent on its first day of trading. What is Rover's stock price forecast after the NEBC merger and will it rise more?

Rover raised nearly $270 million through the business combination, which valued it at approximately $1.63 billion. Rover started trading on Nasdaq under the ticker symbol "ROVR."

Rover stock rose nearly 10 percent on its debut. Investors appear to be pleased with the merger deal. The company’s highly experienced board and management team led by co-founder and CEO Aaron Easterly have also boosted investors' confidence in the stock.

Rover stock could see a sell-off in the near term as investors book profits. In the medium to long term, the stock should trade on Rover’s fundamentals, which seem to be bright. Rover said that the company witnessed a significant rebound in the first half of 2021, boosted by a return to travel and the rise in pet ownership amid the COVID-19 lockdowns.

In June, Rover had its largest-ever booking month yet with total bookings of 421,000, which was higher than the 373,000 in June 2019 before the COVID-19 pandemic. The company also witnessed its biggest single month with a GBV (gross bookings value) of $56.6 million. With 99,000 new bookings in June, it was Rover’s highest new customer month ever, mainly fueled by organic customer acquisition.

Rover also established new records in May with the GBV rising by 18 percent YoY. The company increased its fiscal forecasts in May due to the strong booking patterns.

According to MarketBeat, analysts' average target price for Rover stock is $17, which is 46 percent above its current price. Both Wall Street analysts tracking Rover recommend a buy.

Rover's enterprise value is estimated at nearly $1.6 billion. Based on this value and Rover’s forecast total revenue, its valuation multiples for 2021 and 2022 are 16.5x and 8.0x, respectively. In comparison, Fiverr International, Airbnb, and Etsy are trading at NTM EV-to-sales multiples of 25.8x, 14.3x, and 9.9x, respectively. Rover is much more attractively priced than its peers.

Founded in 2011, Rover is an app for locating dog walkers and sitters. The company has over 500,000 pet care providers across the U.S. and Europe. Rover has generated $48 million in revenues in 2020. The company expects its revenues to rise at a CAGR of 30 percent from 2018–2022 to reach $201 million by 2022. The company sees itself turning adjusted EBITDA positive in 2022. Rover estimates that the total addressable market will grow to $113 billion in 2030, which is up from $79 billion in 2020.

Investors should keep an eye on Rover’s second-quarter earnings results, which are scheduled for Aug. 9. Overall, given the company’s robust growth prospects, strong customer relationships, and attractive valuation, the stock looks like a good long-term investment.