On Tuesday, Mogo reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the company lost $3.2-million on revenue of $11.8-million. A topline that was down slightly from last year’s Q4 was improved by better numbers across the bottom line, including a 173 per cent improvement in Adjusted EBITDA.
“Two thousand sixteen was a milestone year for Mogo with the introduction of our new account platform and iOS app, along with the expansion of our product suite to include free monthly credit score monitoring, mortgages and a digital spending account,” said CEO David Feller. “We are entering 2017 with a leading digital banking platform and four products, giving us more ways to help consumers get in control of their financial health. We’re particularly excited about our new digital MogoMortgage experience as it’s an innovative and differentiated solution in the marketplace and a great example of the power of our platform.”
Ribeiro says Mogo had a better quarter than he expected due to smaller provisions resulting from lower loan loss provisions. Looking forward he expects better things from the resumption of loan growth, from the contribution of prepaid cards and mortgage origination.
“The investment case for Mogo rests on its transformation from an online lender into a digital multi-product distribution platform,” says the analyst. “This transition to a greater contribution from fee-based revenues improves Mogo’s financial profile and growth prospects, as it would 1) provide margin expansion, 2) alleviate capital consumption concerns, and 3)leverage its platform and expanding member base.”
In a research update to clients today, Ribeiro maintained his “Outperform (Speculative)” rating on Mogo, but raised his one-year price target on the stock from $3.00 to $3.50 implying a return of 19 per cent at the time of publication.
Disclosure: Mogo is an annual sponsor of Cantech Letter.