Payfare is a Buy, says Eight Capital

Canadian fintech company Payfare Inc (Payfare Stock Quote, Charts, News, Analysts, Financials TSX:PAY) just reported its first quarter of positive net profit, and the results good, according to Eight Capital analyst Adhir Kadve, who reiterated a “Buy” rating on the stock in a Thursday report.

Payfare, which has digital banking and instant payment solutions aimed at the gig workforce and partners with names like Uber, Lyft and DoorDash, announced its fourth quarter and full 2022 financials on Wednesday. The company saw revenue climb by 131 per cent year-over-year to $38.4 million and adjusted EBITDA hit $3.6 million compared to negative $2.4 million a year ago and positive $1.3 million for the previous quarter.

Payfare saw total gross dollar value jump by 137 per cent year-over-year to $2.4 billion and ended the quarter with 1,053,872 active users, up 106 per cent from a year earlier. Net profit for the Q4 was $2.9 million or $0.06 per share.

“We have a significant user base of over one million active cardholders, a monumental achievement in its own right, that presents material new monetization opportunities to supplement our existing product shelf,” said CEO and founding partner Marco Margiotta in a press release.

Looking at the results, Kadve said Payfare’s $38.4 million topline was slightly below management’s pre-announcement of $39.9 million and compared to his forecast at $38.5 million and the consensus estimate at $38.1 million. Kadve said the difference from the pre-announced figure and the Q4 result came down to an accounting reclassification.

Adjusted EBITDA at $3.6 million was ahead of Kadve’s call at $2.8 million and the Street at $2.3 million. All told, Kadve deemed the impact of the Q4 results a positive for PAY stock and company.

Looking ahead, Kadve said management’s 2023 revenue guidance at $185-$195 million was in-line with the consensus estimate at $187 million but ahead of the Eight Capital forecast at $172 million.

“With the rollout of Paidapp and potential new white label partnerships supporting ongoing revenue growth and a margin enhancing product roadmap we continue to believe there is a strong setup for Payfare heading into the balance of 2023,” wrote Kadve.

Kadve paired his “Buy” rating with a maintained target price of $17.00 per share, which at press time represented a projected one-year return of 208 per cent.

“Our $17/share target price implies 5.0x, a premium to the peer group given Payfare’s significantly higher growth rates,” Kadve wrote.

With the close of its 2022, Payfare reported share buybacks of 1.2 million over the year, at $4.54 per share, with now 46.8 million shares outstanding.