A raised profile with the investment community is benefiting Mogo Finance Technology (TSX:MOGO), says Mackie Research Capital analyst Nikhil Thadani.
In a research update to clients Tuesday, Thadani maintained his “Speculative Buy” rating on Mogo, but raised his one-year price target on the stock from $6.00 to $7.00, implying a return of 47 per cent at the time of publication.
Thadani points out that Mogo is up more than 20 per cent since his June 14th note in which he suggested that the stock was sitting at an attractive entry point. The analyst thinks investors are catching on to his assertion that the company is cheap when compared to its peers. He believes Mogo will be one of the winners in a space that will be rolled-up or partnered-in.
“Consumer banking (is) becoming increasingly digital, (and) Mogo should benefit,” the analyst says. “In addition to Mogo stock benefiting from positive attention, we believe Mogo could be an attractive partner for Tier 2 banks, credit unions, which could benefit from Mogo’s technology platform, national scale and brand (benefiting from Postmedia).”
The Mackie Research analyst says that though Mogo has tightened the gap with its peers of late, there is still a ways it could go.
“We believe Mogo can further benefit from a narrowing valuation discount to peers. On a 2018 basis, Mogo trades at 2.2x net sales vs. FinTech names at ~3.9x (unchanged in the last couple weeks). Recall, we exclude funding debt (i.e. credit facilities to fund loan book including recent $15 mln debt raise) from net debt and account for loan book interest revenue net of funding interest expenses. Relative to Fintech stocks, our revised $7/sh price target reflects a discount revenue multiple of 3x net 2018 revenue (2.7x previously).”
Thadani thinks Mogo will generate EBITDA of $560,000 on revenue of $47.6-million in fiscal 2017. He expects those numbers will improve to EBIDTA of $8.32-million on a toplne of $69.6-million the following year.