Payfare stock is headed to $17 per share, says Eight Capital

The year ahead looks like a good one for Payfare Inc (Payfare Stock Quote, Charts, News, Analysts, Financials TSX:PAY), according to Eight Capital analyst Adhir Kadve, who reported on the fintech company on Wednesday and reiterated a “Buy” rating on the stock and $17.00 target price.

Toronto-based Payfare, which has digital banking and instant payment solutions aimed at the gig workforce, announced on Wednesday that for the first time it hit the one-million mark in active users. The company said it has experienced a nine per cent rise in users in the fourth quarter compared with the end of the previous quarter on September 30 and a 95 per cent increase year-over-year, adding 488,228 active users since December 31, 2021.

Payfare said the milestone shows the company building scale, which will contribute to near-term cash flow and thus allow for developing new monetization opportunities beyond its currently available products.

“We are incredibly proud to announce to the market that we have surpassed the one million active user threshold, an achievement not met by many,” said Marco Margiotta, CEO and Founding Partner, in a press release.

Commenting on the announcement, Kadve called its impact slightly positive on the company and stock. He said the pace of user growth had slowed for Payfare over the third quarter, due to the expiry of fuel incentives introduced earlier in the year along with seasonality, but the reappearance of solid growth now provides upside to his and the consensus estimates on the company’s fourth quarter, both of which are calling for Q4 revenue of $38.1 million compared to revenue of $35.9 million in the third quarter.

“With DoorDash and Lyft seeing benefits from their respective partnerships with Payfare and internal initiatives like Paid app, we continue to believe that Payfare’s opportunity remains robust heading into F23, supporting our user growth, revenue growth and profitability targets,” he said.

Kadve said the partnership with DoorDash has been pivotal, as the introduction of its DasherDirect card has pushed Payfare’s users growth to 20x since its inception in 2020.

“Based on this success we expect that both Payfare and DoorDash together will aim to increase user penetration of the Dasher base from a historical target of 30 per cent to above 60 per cent, via ongoing growth in Dashers and introduction of new rewards programs and services,” he said.

“Further, on the Rideshare side, Lyft has enhanced its offering to include new fuel incentives aimed at driver engagement and acquisition, while also benefitting from the recovery in rideshare volumes. When combined we see ongoing support for user growth coming from existing partnerships,” Kadve wrote.

At the time of publication, Kadve’s $17.00 target price represented a projected one-year return of 282 per cent.