Mogo’s subscription revenue growth is driving huge upside, Mackie Research says

Fintech company Mogo Finance Technology (Mogo Finance Technology Stock Quote, Chart, News: TSX, NASDAQ:MOGO) presents a good entry point for investors, says Nikhil Thadani, analyst with Mackie Research Capital Corporation, who on May 9 maintained his “Speculative Buy” rating and $12.00 target price.

Last week, Vancouver-based Mogo Finance announced its first quarter ended March 31, 2018, results, posting total revenue of $14.3 million, up from $11.3 million in Q1/17, Adj. EBITDA of $0.3 million, which is up 18 per cent over last year’s Q1.

“We delivered our highest-ever quarterly revenue, accelerating growth in our subscription & services revenue, and rapid member growth in the first quarter,” said David Feller, Mogo founder and CEO, in a press release. “Our goal is to become the go-to financial app for the next generation of Canadians, and every quarter we focus on improving our value proposition, whether with new features, an improved user experience or new products.”

Feller’s comments come on the heels of a busy recent round of insider buying for the firm.

Thadani says the Q1 came in-line with expectations, with his and the Street’s revenue estimates being $13.8 million and $13.9 million, respectively, while his and the consensus Gross Margin estimates were 66.6 per cent and ~68 per cent, respectively, versus Mogo’s ~65.4 per cent.

“Growth of core revenue, which is total revenue excluding loan fees (short term loan driven) and is a management focus should accelerate,” the analyst says.

“Mogo trades at ~1.5x 2019 core net sales versus FinTech names at ~5x,” adds the analyst. “Our $12 target implies ~5x 2019 core net sales in-line with peers. We expect improving 2018 execution driving towards growth in subscription and services revenue should aid valuation.”

Thadani’s $12.00 target price represents a projected return on investment of 288 per cent as of publication date.