Mogo Finance Technology has a 234 per cent upside, says Mackie Research

Bitcoin may be stuck in neutral but Mogo Finance Technology (Mogo Finance Technology Stock Quote, Chart, News: TSX:MOGO) should pull out of the crypto-slump, thanks to growth in fee based revenue and a new product line, says analyst Nikhil Thadani of Mackie Research Capital. On Tuesday, the analyst reiterated his “Speculative Buy” rating and one-year target price of $12.00.

Bitcoin and the blockchain technology behind it and other cryptocurrencies took the investment world by storm this past year, but so far the sector has been in the doldrums for 2018 — bitcoin itself lost more than half of its value since peaking in late December.

With its ties to cryptocurrencies through recently launched Mogo Blockchain Technology, shares in Mogo Financial have taken a hit, too, losing 45 per cent of their value on the year. But expect the Vancouver-based fintech company to post strong revenue growth over 2018 and 2019, says Thadani, who says that Mogo is currently trading at a discount.

“Mogo trades at ~1.3x net sales versus fintech names at ~4.2x on a 2019 basis (ex. outliers) and 4.7x average,” says the analyst in a note to clients.

“We believe that Mogo’s planned & imminent crypto products could help further deepen the company’s direct consumer relationships, especially with younger users. Mogo’s product roadmap could also enable innovative new features, i.e., loading prepaid debit cards with crypto (which we expect will expand beyond bitcoin). Such features could not only encourage additional usage (positive for fee based revenue) but could also help to accelerate member growth,” says Thadani.

Earlier this month, Mogo released its Q4 and full-year 2017 financial results, which were highlighted by a 96 per cent year-over-year growth in subscription and fee based revenue, which now accounts for 31 per cent of the company’s total revenue. Total revenue for Q4 was up 13 per cent over Q4 2016 at $13.3 million.

“We expect this revenue to grow to ~$37 million in 2019 from ~$8 million in 2016. Our estimates are conservative, as they imply subscription and fee based revenue to contribute less than 45 per cent of 2019 revenue versus management guidance of ~50 per cent in 2018,” says the analyst.

Thadani’s $12.00 target price is based on ~4x EV/2019 net sales, which he sees as a discount to Mogo’s peer group. The target represents a projected one-year return of 234 per cent at the time of publication.

Disclosure: Mogo is an annual sponsor of Cantech