On Tuesday, H.C. Wainwright maintained a positive outlook on shares of Mogo Finance Technology (NASDAQ:MOGO), reiterating a Buy rating and a price target of $6.00. The firm's confidence in Mogo's potential for revenue growth and cost management was reinforced following discussions with the company's management at the 26th Annual H.C. Wainwright Investment Conference in New York.
The firm forecasts a 10.5% revenue increase for Mogo in 2024, with expectations of acceleration to 13.9% in 2025. This growth is attributed to the company's subscription and service revenue, which is anticipated to rise by 12.3% in 2024 and 23.0% in 2025. The firm notes that these revenues are highly visible and recurring, bolstering the company's financial stability.
Despite projections of a stable loan book between 2024 and 2025, Mogo is expected to benefit from reduced borrowing costs due to a declining Federal Funds rate. This is likely to improve the company's cash flow as it funds its loan book through a credit facility.
Moreover, Mogo's investment portfolio, valued at C$30.2 million as of June 30, 2024, including C$18.6 million in marketable securities and C$11.6 million in other investments, is seen as an underappreciated asset given the company's current market capitalization of just C$39.2 million.
H.C. Wainwright suggests that Mogo's substantial membership base of over 2 million could make it an attractive acquisition target for U.S. fintech firms seeking to enter the Canadian market. The company's strong balance sheet, with more than $41.0 million in cash, marketable securities, and investments, indicates that Mogo is well-positioned financially and unlikely to need additional capital in the short term.
The firm's recommendation for investors is to build positions in Mogo now, in anticipation of the company's improving operational results and to take advantage of current investor hesitancy. The reiterated Buy rating and $6 price target reflect the firm's belief in Mogo's growth trajectory and underlying value.
In other recent news, Mogo Finance Technologies Inc. reported positive results for the second quarter. The company saw a 10% increase in revenue, reaching $17.6 million, and a 12% rise in payment volume through its Carta service, amounting to $2.8 billion. Mogo's wealth business also saw significant improvements, with the firm aiming to disrupt the traditional mutual fund industry with its affordable and simplified investing platform.
Mogo concluded the quarter in a strong financial position, holding approximately $41 million in cash, investments, and marketable securities. Despite nearly half of Mogo's market cap comprising crypto-related investments, these currently do not contribute to revenue. However, the company plans to increase marketing efforts and anticipates subscription service revenue to grow in the mid-teens by fiscal year 2024, with adjusted EBITDA guidance set between $5 million and $6 million.
These developments reflect Mogo's strategy to prioritize long-term growth in wealth and payments, as emphasized by CEO Greg Feller. The company maintains positive cash flow from operations, demonstrating its strong financial health. As part of its future plans, Mogo aims to leverage its wealth business's growth potential, which currently has an average revenue per user (ARPU) of $180 for its wealth products.
InvestingPro Insights
As H.C. Wainwright maintains its Buy rating on Mogo Finance Technology, current metrics and analyst insights from InvestingPro offer additional context for investors. With a market capitalization of $28.18 million, Mogo's valuation reflects a challenging financial landscape, marked by a negative P/E ratio of -2.26, suggesting investor concerns about profitability. Despite this, analysts have revised their earnings upwards for the upcoming period, hinting at potential optimism surrounding the company's future performance.
InvestingPro data also reveals that Mogo's revenue for the last twelve months as of Q2 2024 stands at $30.12 million, with a gross profit margin of 60.24%, indicating a strong ability to convert sales into profit. However, the company's revenue growth has seen a decline of -4.51% over the same period, which may raise questions about the sustainability of its growth trajectory. This is in line with the firm's revenue increase forecast, suggesting that while growth is expected, it may be at a slower pace.
InvestingPro Tips highlight that Mogo is quickly burning through cash and that its stock price movements are quite volatile, which could be a concern for risk-averse investors. Moreover, the company's liquid assets exceed its short-term obligations, providing some financial flexibility in the near term. For those considering an investment in Mogo, there are currently 11 additional InvestingPro Tips available, offering deeper analysis and insights that could inform investment decisions.
The company's stock has indeed taken a significant hit over the last six months, with a price total return of -38.62%, which may present a buying opportunity for those who believe in the company's recovery and long-term potential. With the next earnings date scheduled for November 8, 2024, investors will be keen to see if the company can reverse its fortunes and start a trajectory towards profitability.
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