In a research report to clients today, Thadani initiated coverage of Mogo with a “Buy” rating and a one-year price target of $6.00, implying a return of 79 per cent at the time of publication.
Thadani says Mogo is experiencing meaningful momentum for the first time as a public company.
“While Mogo’s stock price is still meaningfully below the $10 2015 IPO debut price, ~75% year-to-date stock price appreciation provides a preview of potential value,” he says. “New fee based product revenue growth should aid additional stock price appreciation. Volatility as evidenced by recent stock price action should be expected, as with any company entering green field growth areas.”
The analyst says the company’s new product offerings are gaining momentum in part because of the company’s unique distribution agreement.
“Mogo’s 2016 Postmedia partnership has enabled increased member growth with a ~85% reduction in Customer Acquisition Cost,” says Thadani. “We expect renewed loan book growth from Q2/17. New mortgage and pre-paid visa cards products provide growth potential with lower capital needs. We believe our estimates for mortgage & pre-paid visa ramp are conservative, as these products have only been recently introduced.”
Thadani expects Mogo will post EBITDA of $691,000 on revenue of $49.1-million in fiscal 2017. He thinks these numbers will improve to EBITDA of $8.34-million on a topline of $69.1-million the foloowing year.
Disclosure: Mogo is an annual sponsor of Cantech Letter.