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Adhir Kadve of Eight Capital is ready to start a journey with Voyager Digital (Voyager Digital Stock Quote, Chart, News CSE:VYGR), initiating coverage on Wednesday on the digital asset focused agency broker and financial services firm with a "Buy" rating and a target price of $31.00/share for a projected one-year return of 80 per cent. Since its inception in 2018, Voyager Digital has enjoyed a quick rise in the digital asset and cryptocurrency industry, first being publicly listed in the opening quarter of 2019 before adding iOS and Android apps to its arsenal by the end of the year and following up with a desktop launch at the end of 2020. Voyager has also initiated multiple acquisitions over its tenure, beginning with a merger with universal wallet app Ethos in the fourth quarter of 2019, then adding fellow cryptocurrency holding company Circle Invest late in the first quarter of 2020 before beginning its expansion to Europe in the fourth quarter of 2020 by acquiring LGO, a French crypto exchange primarily serving institutional investors. The company has also grown its partnership portfolio, diving into equity trading through its partnership with Market Rebellion as well as payments through a partnership with Lottery.com. The Voyager app now supports over 60 types of cryptocurrencies including Bitcoin, Ethereum, stablecoins and a growing base of altcoins, in addition to the ability to earn interest on cryptocurrency deposits, including the USDC, which allows for a 1:1 conversion between USDC and actual American dollars. Along the way, Voyager Digital has built up $3.3 billion in assets under management, with over 95 per cent of those assets coming within the last three financial quarters. Amidst the volatility of cryptocurrency in its early days, Kadve sees Voyager Digital as a stable option, particularly with a potential change in stock exchanges on the horizon. “We see the planned up-listing to the TSX as a near-term catalyst for the stock and a well-defined user acquisition strategy based on increased marketing spend, product rollouts, platform enhancements and geographic expansion as avenues for revenue growth,” Kadve said. Kadve identifies Voyager’s management team as a significant strength, as the company is led by former E*TRADE Financial executive Steve Ehrlich as co-founder and CEO, with support from fellow co-founder and board chairman Phillip Eytan and Oscar Salazar, the founding Chief Technical Officer of Uber. Kadve projects 2021 to be a significant year for Voyager, as he forecasts a boom in revenue to $172.6 million with $77.4 million in EBITDA, a far cry from the $1.1 million in reported revenue for 2020 with -$9.6 million in EBITDA. The analyst forecasts an even better 2022 at $479.6 million in revenue and $150.9 million in EBITDA, which would drop the projected EBITDA margin to 31 per cent from the projected 45 per cent in 2021. The valuation picture also figures to come into clearer focus this year, as more meaningful data has Kadve projecting the company’s EV/Sales multiple to be 13.2x for 2021, then dropping to 4.7x in 2022. The EV/EBITDA multiple follows a similar path, projecting to drop from 29.4x in 2021 to 15.1x in 2022. The price-earnings ratio projects to have its first yield in 2022, coming in at 15.8x with an estimated EPS of $0.60/share. “Our June quarter reflects continued growth of our platform, with revenues up more than 65 per cent from the March quarter. Although we have seen a significant decrease in crypto market volume since mid-June, we continue to see significant net new funded account growth, net asset inflows, and consistent basis points on spread revenues on our platform continue through today,” Ehrlich said in the company’s July 15 press release. “We continue to advance our marketing efforts and move forward on a host of important initiatives, including the launch of our Voyager Loyalty Program (VLP) program set to kick-off in September, and Voyager’s payment processing capabilities," he said. On top of cryptocurrency still being in its early days, Kadve’s investment thesis also points to Voyager attempting to effectively build an ecosystem for retail investors with cryptocurrency to act like a futuristic financial firm with a focus on expanding its customer infrastructure beyond its current 1.75 million accounts, the potential for expansion into Canada, Europe, and New York, the only state where the company doesn’t have a BitLicense. Kadve also points to the potential for Voyager to be ahead of the curve as it relates to Altcoins with the market continuing to expand. Though shares in Voyager have been somewhat pressured by a retreat in cryptocurrency earlier this year - the stock rose from $5 at the start of the year to as high as $36 by early April but has dropped below $20 more recently - Kadve believes the company has stabilized enough to be an attractive investment. “VYGR currently trades at 4x C22E EV/Revenue, a significant discount to industry bellwether Coinbase which trades at ~9x,” Kadve said. “Our C$31/share target is based on 7x to reflect Voyager's relatively smaller scale. We believe continued user growth and execution in building out its platform will lead to a narrower discount to COIN."

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