B.Riley has adjusted its outlook on Pagaya Tech (NASDAQ: NASDAQ:PGY), reducing the price target to $36 from the previous $48 while maintaining a Buy rating for the stock.
The adjustment comes amid expectations of a significant decrease in the company's cost of capital and funding.
Pagaya Tech is anticipated to lower its effective interest rate from approximately 17% to 10% or less, which could lead to annual interest expense savings of $30 million.
The analyst from B.Riley highlighted that following a forthcoming transaction, Pagaya Tech is expected to exhibit positive total cash flow. Moreover, the company is projected to reach free cash flow (FCF) positive status in 2024, which is sooner than the prior expectations of early 2025.
Additionally, Pagaya Tech is anticipated to report GAAP net income (NI) positive results ahead of schedule in 2025, outpacing its peers in the platform lending industry.
In other recent news, Pagaya Technologies recently reported strong Q2 2024 earnings, with a network volume of $2.3 billion and a record $50 million in adjusted EBITDA.
Despite a net loss of $75 million due to share-based compensation and fair value adjustments, the company has raised its full-year outlook.
Pagaya Technologies also signed a $1 billion forward flow agreement with Castlelake and achieved a AAA rating on its personal loan ABS program.
In a recent executive transition, Scott Bower stepped down as the principal accounting officer, with Nam Woo Kim taking over Bower's responsibilities on an interim basis. Furthermore, the company appointed Rajinder Singh, a veteran in the banking and financial services industry, as its new Chief Risk Officer.
A significant development was the decrease in Pagaya's price target from $42.00 to $32.00, announced by Canaccord Genuity, due to a delay in the HARMONY study. Despite this, the firm maintains a Buy rating on the stock.
Pagaya Technologies also entered into a Warrant Agreement with an affiliate of Castlelake, according to a recent SEC filing. Benchmark initiated coverage of Pagaya shares with a Buy rating, projecting that the company's potential to self-fund its growth may lead to GAAP net income profitability by 2025.
InvestingPro Insights
Recent InvestingPro data provides additional context to B.Riley's analysis of Pagaya Tech (NASDAQ: PGY). The company's market capitalization stands at $715.28 million, with a revenue of $925.42 million for the last twelve months as of Q2 2023. Notably, Pagaya has shown strong revenue growth, with a 27.98% increase in the most recent quarter.
InvestingPro Tips highlight that Pagaya is currently trading at a low revenue valuation multiple, which aligns with B.Riley's decision to maintain a Buy rating despite lowering the price target. This could suggest potential upside for investors if the company achieves its projected financial milestones.
Another relevant InvestingPro Tip indicates that analysts predict the company will be profitable this year. This corresponds with B.Riley's expectation of Pagaya reaching free cash flow positive status in 2024 and GAAP net income positivity in 2025.
It's worth noting that InvestingPro offers 5 additional tips for Pagaya Tech, providing investors with a more comprehensive analysis of the company's financial situation and market performance.
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