On Monday, Benchmark began covering Pagaya (NASDAQ:PGY) Technologies Ltd. (NASDAQ:PGY) shares with a Buy rating and a stock price target of $21.00. The firm's analysis is based on a 7x EV/EBITDA multiple of their forecasted FY25E adjusted EBITDA of $241 million. The recommendation comes after a notable decline in Pagaya's share price following its second-quarter earnings report for 2024.
The firm pointed to the recent pullback in share price as an opportunity for investors, highlighting the company's robust business performance indicated in the recent earnings report. Despite the market's reaction to a reported approximate $58 million loss from marking older-vintage loans to fair value, Benchmark emphasized the company's advancements on several fronts.
Benchmark also noted Pagaya's potential to start self-funding its growth, which is seen as a positive indicator for the company's future. According to the firm, this positions Pagaya to potentially achieve GAAP net income profitability by 2025.
The coverage assumption by Benchmark reflects a belief in Pagaya's capacity to overcome the singular negative aspect of its second-quarter report. The firm suggests that the market may have overlooked the company's significant progress, focusing too narrowly on the reported losses.
In conclusion, Benchmark's coverage presents a positive outlook for Pagaya Technologies, emphasizing the company's strong business momentum and the potential for future profitability, despite the recent market reaction to its quarterly financial results.
In other recent news, Pagaya Technologies Inc. reported strong financial results for the second quarter of 2024, surpassing its own revenue and adjusted EBITDA guidance. The fintech company has raised its full-year outlook, noting robust growth in fee revenue less production costs (FRLPC) and four consecutive quarters of positive operating cash flow.
The annual run rate for Pagaya now stands at approximately $1 billion in revenues, with FRLPC at $400 million and adjusted EBITDA at $200 million.
Recent developments include a $1 billion forward flow agreement with Castlelake and a AAA rating on its personal loan ABS program. The company's strategic priorities include network expansion with top lenders, capital efficiency improvement, and unit economics enhancement.
Pagaya's recent acquisition of Theorem and partnership with OneMain are strategic moves to enhance funding diversification and market presence.
Despite a net loss of $75 million due to share-based compensation and fair value adjustments, Pagaya achieved record levels of total revenue, FRLPC, and adjusted EBITDA in Q2.
The company provided a positive outlook for Q3 and the full year of 2024, with network volume projected to be between $2.3 billion and $2.5 billion in Q3. The full-year network volume forecast was narrowed to between $9.25 billion and $10.25 billion.
InvestingPro Insights
As Pagaya Technologies Ltd. (NASDAQ:PGY) navigates through its growth stages, real-time data from InvestingPro offers a snapshot of the company's financial health and market perception. With a Market Cap of approximately $937.19 million and a notable Revenue Growth of 18.78% over the last twelve months as of Q2 2024, the company appears to be expanding its financial base. This growth is further underscored by a substantial EBITDA Growth of 142.61% during the same period, signaling improving operational efficiency.
InvestingPro Tips suggest that analysts are optimistic about Pagaya's future, with four analysts revising their earnings upwards for the upcoming period, and a prediction that the company will be profitable this year. This aligns with Benchmark's analysis and adds credibility to the potential for Pagaya to start self-funding its growth and achieve net income profitability by 2025.
However, the company's stock price has experienced significant volatility, with a 6-month price total return of -27.5%. This volatility may present both risks and opportunities for investors, depending on their investment strategy and horizon. It is also worth noting that Pagaya does not currently pay a dividend, which might influence the investment decisions of income-focused shareholders.
For those looking for more in-depth analysis, there are additional InvestingPro Tips available, offering a comprehensive view of Pagaya's financials and market performance. Access to these tips can be found by visiting the dedicated page for Pagaya on InvestingPro.
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