On Thursday, KeyBanc Capital Markets adjusted its outlook on Remitly Global Inc (NASDAQ:RELY), a mobile payments service provider, by increasing its price target to $21 from $20 while maintaining an Overweight rating on the stock. The upgrade comes after Remitly reported a significant third-quarter beat, surpassing expectations with its financial performance.
Remitly's third-quarter results were bolstered by favorable foreign exchange-related tailwinds, which led to increased send activity and, consequently, revenue outperformance. The company also saw a rise in its quarterly active users. Adjusted EBITDA gains were driven by transaction margin expansion, the positive impact of revenue performance, and lower-than-anticipated marketing expenses.
The company achieved record numbers of new customers, while maintaining efficient marketing strategies, with the payback period for these efforts remaining under 12 months. Additionally, Remitly reached GAAP profitability, which addresses some of the critical concerns previously held by investors. Despite the robust third-quarter results, Remitly's fourth-quarter guidance did not fully incorporate the third quarter's gains, attributed to the significant impact of foreign exchange tailwinds.
Looking ahead to fiscal year 2025, Remitly's initial revenue growth projections are slightly below market expectations, with a forecast of low- to mid-20s percentage growth. This cautious guidance aims to account for the normalization of the foreign exchange impact. In response to the third-quarter performance and management's guidance, KeyBanc has revised its fiscal year 2024 revenue and adjusted EBITDA estimates upwards, while slightly lowering its fiscal year 2025 revenue growth prediction to 24% year-over-year.
KeyBanc's decision to reiterate an Overweight rating and raise the price target to $21 reflects confidence in Remitly's customer acquisition trends, marketing efficiency, and the management's improved visibility and communication regarding growth drivers.
In other recent news, Remitly Global Inc. reported a substantial increase in revenue for the third quarter of 2024, with a 39% growth to $336.5 million. The company also noted a nearly 14% margin with an adjusted EBITDA of $46.7 million. Other highlights include a 35% increase in active customers to 7.3 million and a 42% rise in send volume to $14.5 billion. In light of these developments, Remitly has raised its full-year revenue and adjusted EBITDA outlook for 2024.
The company is also formulating a plan for 2025, targeting continued growth and customer loyalty. It should be noted that Remitly anticipates a low to mid-20s revenue growth for 2025, driven by customer loyalty and a strong product.
However, the company also expects a sequential decline in the gross take rate due to transaction size and currency fluctuations. These are among the recent developments for Remitly, as reported in their latest earnings call.
InvestingPro Insights
Remitly Global Inc's recent performance aligns with several InvestingPro metrics and tips. The company's revenue growth of 35.55% over the last twelve months supports KeyBanc's positive outlook. This growth trajectory is further reinforced by an InvestingPro Tip indicating that net income is expected to grow this year, which could contribute to the company's improving financial position.
Despite not being profitable over the last twelve months, an InvestingPro Tip suggests that analysts predict Remitly will be profitable this year. This aligns with the company's recent achievement of GAAP profitability mentioned in the article, addressing a key investor concern.
The company's strong recent performance is reflected in its stock price, with InvestingPro data showing a 13.97% return over the last month and a 15.52% return over the last three months. This positive momentum supports KeyBanc's decision to raise the price target.
It's worth noting that Remitly is trading at a high Price / Book multiple of 5.14, which investors should consider in their valuation assessments. For a more comprehensive analysis, InvestingPro offers additional tips and metrics, with 8 more tips available for Remitly Global Inc.
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