MOGO stock keeps “Buy” rating at Eight Capital

Following the company’s fourth quarter results, Eight Capital analyst Adhir Kadve has kept his “Buy” rating on Mogo (Mogo Stock Quote, Chart, News, Analysts, Financials TSX:MOGO).

On March 20, MOGO reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $2.7-million on revenue of $17.2-million.

“Our focus in 2023 was to build a more profitable and efficient company, while at the same time increasing product velocity and driving user experience improvements for our digital wealth platform,” CEO David Feller said. “We made excellent progress on both fronts, meaningfully improving both the value of our wealth products and our profitability. Following the recent relaunch of both Moka and Mogo, we are in a great position to accelerate our marketing efforts in 2024 to build our user base and advance our mission to help the next generation of Canadians get on a path to achieving financial freedom. The wealth industry in Canada needs to change — people are overpaying and underperforming, and the statistics show that most are not on a path to build the wealth they need to retire. We believe we have a disruptive value proposition and products that can change this outcome, helping the next generation achieve financial freedom.”

Kadve commented on the quarter.

“Mogo reported Q4 results, which came in modestly above consensus/our expectations both on the top line and profitability,” he wrote. “Mogo continues to show broad based momentum with three consecutive quarters of sequential revenue growth. Though y/y revenue growth was flat in Q4, we like to see the ongoing progress towards consolidated revenue growth, given that for the balance of F23, revenues were declining. This was due to Mogo prioritizing cost optimization and sun-setting non-core products into a more focused group of key products including its Wealth and Payments businesses. In F24 the company will pivot its priorities and aim to significantly invest in those products, which will compress margins but should drive a reacceleration of consolidated revenue growth, led by Subscription and Services revenue.”

In a research update to clients March 21, Kadve maintained his “Buy” rating and price target of $6.00.

The analyst thinks MOGO will post Adjusted EBITDA of negative $4.0-million on revenue of $72.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $10.8-million on a topline of $85.0-million in fiscal 2025.

“We are maintaining our BUY rating and our C$6.00/share target price. We value Mogo using a Sum-Of-The-Parts valuation methodology,” Kadve added. “To that end, we have rolled our valuation to F25 and we now ascribe a 10.5x F25E EV/EBITDA multiple to Mogo’s Core operations yielding $4.95/share in value. For conservatism, we mark-to-market Mogo’s stake in WNDR and thus we add an additional $0.90/share, bringing our amalgamated value to $6.00/share
(rounded).”