Propel Holdings wins target raise at Eight Capital

Following the company’s fourth quarter results, Eight Capital analyst Adhir Kadve has raised his price target on Propel Holdings (Propel Holdings Stock Quote, Chart, News, Analysts, Financials TSX:PRL).

On March 12, PRL reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $22.4-million on revenue of $96.0-million, a topline that was up 54 per cent over the same period a year prior.

“As we look ahead to 2024, we see tremendous opportunity to continue growing our core business in serving the more than 70 million Americans and Canadians who are underserved by traditional financial institutions,” CEO Clive Kinross said. “We will continue to add additional opportunities, including expanding our Lending-as-a-Service offering, broadening our product suite, and expanding into new geographies. We have the people, technology, infrastructure, experience and are well capitalized to continue to realize our vision of becoming the global leader in financial services for underserved consumers.”

The analyst gave his take on the quarterly results.

“Propel reported Q4/F23 results, which came in ahead of both our and consensus expectations with F24 revenue and profitability guidance, significantly higher than our street high expectations (at the midpoint),” he wrote. “With ongoing strength in consumer demand for credit and credit performance, which continued into the first three months of F24, the company is guiding towards +35% y/y revenue growth and expanding profitability. In our view, this continues to reflect Propel’s strong execution and underwriting posture, and reinforces our thesis for continuous profitable growth ahead. Further, the LaaS partnership is firmly in ramp up mode and is expected to be a contributor to revenue growth and profitability expansion in F24 (H2 weighted), F25 and beyond. We continue to believe that as this segment scales, it represents a key re-rate catalyst for shares.”

In a research update to clients March 14, Kadve maintained his “Buy” rating on Propel, but raised his price target on the stock from $20.00 to $25.00.

The analyst thinks PRL will post Adjusted EBITDA of $109.2-million on revenue of $422.4-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $148.6-million on a topline of $506.7-million in fiscal 2025.

“We are maintaining our BUY rating but increasing our target price to C$25/share (from C$20/share), on higher estimates and valuation multiple,” Kadve added. “Propel currently trades at 6.2x F25E P/E, a discount to a peer group of Non-prime lending companies who trade at 8.4x. Our target price is based on 9.0x (was 7.5x) F25E P/E. Key risks to our target include: Macroeconomic uncertainty, underwriting risks, capital risks, personnel risks and regulatory risks.”