Mogo could rise to more than $15.00 a share, Mackie Research says

He’s a longtime bull on Mogo Finance Technology (TSX:MOGO), but Mackie Research Capital analyst Nikhil Thadani is feeling more expansive than ever about the company’s future.

On Wednesday, Mogo reported its Q3, 2017 results. The company posted EBITDA of $1.0-million on revenue of $12.6-million, a topline that was flat year-over-year, but up 10 per cent sequentially.

“The third quarter represented an important inflection point for Mogo as we delivered more-than-60-per-cent growth in other product revenue and fees, which highlights the power of Mogo’s digital platform,” said CEO David Feller. “As banking continues to undergo a digital transformation, in our view, the next generation of consumers will want and expect multiple products in one seamless mobile account. We’ve invested more than $150-million building what we believe is the leading mobile-first digital banking experience in Canada — supported by a member base of more than 500,000, a brand that is increasingly recognized and trusted, and a 250-person fintech team. Now we are ideally positioned to further monetize this platform by launching new products that add value to our members while creating additional revenue streams for Mogo. We have several new products on our near-term road map, including MogoProtect, an identify fraud protection product, along with the recently announced crypto account, which will give Canadians a simple and trusted way to buy and sell bitcoin within their MogoAccount. It’s clear that bitcoin is going mainstream and increasingly viewed as the new digital gold. This will be the first of multiple products based around bitcoin and blockchain technology.”

Noting that the Mogo third quarter results featured its strongest gross margin in nearly four years, the analyst says these results support the company’s evolution towards becoming a true financial platform, versus a tired investor perception that it is a consumer lender with a mobile app.

“Q3 results last night illustrated strong q/q fee based revenue at $3.7 mln (+60% y/y, +30% q/q) vs. our $3.1 mln estimate,” the analyst explains. Mogo ended Q3 with 492K members vs. our 479K estimate. On November 1st, Mogo announced that the company surpassed 500K members on its platform, a milestone we did not model until December/January. Q3 Average Revenue Per Member (ARPM) of ~$27/user/qtr was roughly inline with our expectation of ~$26/user/qtr. Q3 Customer Acquisition Cost (CAC) was $33/member vs our $39/member estimate. As a result, reported revenue and GM of ~$12.6 mln and 68% (highest since at least Q1/14) beat our estimates of ~$11.9 mln and 63%. (Q3 charge offs at 15.0%, were the best in at least three years).”

In a research update to clients today, Thadani maintained his “Speculative Buy” rating, but raised his one-year price target on Mogo from $9.00 to $12.00, implying a return of 107 per cent at the time of publication. But the analyst says he could see Mogo going much higher than that.

“If the company can execute on new fee based products in 2018, we see upside over ~$15/sh.,” Thadani says.