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Two fintech stocks analysts love in this market

PRL stock

Fintech is hot. And it also is not.

Talk to five people in the fintech space and you will probably get five different answers about fintech’s promise right now.

In Amsterdam, at the recent Money 20/20 conference, CNBC found that enterprise, not consumer facing companies were all the rage.

“B2B is definitely in good shape — both SME and enterprise SaaS [software-as-a-service] — providing you can demonstrate your products and services, have proven customer demand, and good unit economics,” said Richard Davies, CEO of Allica Bank said. “Embedded finance certainly is part of this and has a long way to run as it is in its infancy in most cases.”

Here in Canada fintech stocks, like most in what has become a “stock pickers market” have to be considered on an individual basis.

Here are two Canadian fintech stocks that analysts are currently bullish on.

PROPEL HOLDINGS

In a research update to clients September 18, Eight Capital analyst Adhir Kadve maintained his “Buy” rating and one-year price target of $15.00 on Propel Holdings (Propel Holdings Stock Quote, Chart, News, Analysts, Financials TSX:PRL)

Propel Holdings is a Toronto based company with an AI-leveraged online lending platform that facilitates the origination of loans and lines of credit to underserved non-prime consumers.

Kadve thinks PRL will post Adjusted EBITDA of $77.9-million on revenue of $318.6-million in fiscal 2023. He expects those numbers will improve to EBITDA of $119.6-million on a topline of $417.3-million the following year.

PRL is looking for topline growth, but is really focused on profitability.

“Management noted that Propel is on track to deliver monthly revenue of b/w $33-$35mm in December 2023,” he said. “This translates to $408mm in run-rate revenue (at the midpoint), and while Propel is a cyclical business (Q1 tends to be light building into Q4), it sets a strong baseline for F24 and de-risks our F24 revenue forecasts ($417mm, +31% y/y growth). Management also noted that they can double the size of their loan book while maintaining their conservative underwriting posture. When combined with Propel’s operational execution, which has led to enhanced profitability, this bodes well for the ongoing and profitable growth ahead.”

QUISITIVE TECHNOLOGY SOLUTIONS

Following the company’s second quarter results, Eight Capital analyst Christian Sgro remained bullish on Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Chart, News, Analysts, Financials TSXV:QUIS).

On August 28, QUIS reported its Q2, 2023 results. The company posted EBITDA of $4.4-million on revenue of $45.3-million, down 37 per cent and five per cent, respectively, over the same period last year.

Sgro provided his take on the quarter.

“Quisitive reported results below consensus estimates, as weakness in Cloud demand pushed out deals and pressured margins. Management provided guidance ranges for H2/23, showing confidence in near-term visibility as deals cross the finish line,” he said. “The Payments segment remains an important area of diversification, as PayiQ makes progress toward broader adoption. Despite our reduced estimates, we continue to see value in Quisitive shares as the company pushes through macroeconomic headwinds and maintains positive cash flow.”

In a research update to clients August 29, the analyst maintained his “Buy” rating on QUIS but trimmed his price target from $1.50 to $1.25.

Sgro now thinks Quisitive will post Adjusted EBITDA of $26.3-million on revenue of $187.7-million in fiscal 2023. He expects those numbers will improve to EBITDA of $34.1-million on a topline of $207.9-million the following year.

“Quisitive currently trades at 4.8x compared to cloud and payments peers at 10.5x and 12.3x, respectively,” the analyst concluded. “Of note, our target price calculation considers the impact of all near-term cash/equity earn-outs. Key risks to our target include macroeconomic weakness or delays to sales cycles.”

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