MoneyLion Stock: Unloved and Oversold (NYSE: ML)

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“He who lives within his means suffers from a lack of imagination.“-Oscar Wilde

Today, we’re taking a deep dive into a small fintech company that recently made its market debut via SPAC. Like so many others who have gone public in this matter in 2020 and 2021, stocks find themselves at the bottom of ‘Failed IPO‘ territory. However, these stocks seem unloved and oversold. An analysis follows below.

Stock chart

Looking for Alpha

Company presentation:

MoneyLion Inc. (New York Stock Exchange: ML) is a New York-based financial technology platform that caters to middle-class Americans, offering banking, personal loans, credit enhancements, cash advances, managed investments, and crypto products -change. Through its recent acquisitions of Even Financial and MALKA, it has diversified into affiliate marketing, as well as media and content management. MoneyLion was founded in 2013 and went public through a reverse merger into special purpose acquisition company (SPAC) Fusion Acquisition Corp., generating net proceeds (primarily from PIPE funding) of $293.2 million at a valuation of $10 per share in September 2021. Its first trade as a public company traded at $9.397 per share and its shares have fallen like a lead balloon ever since. Shares of the company trade at just under $1.50 per share, which equates to an approximate market capitalization of $320 million.

Competitive positioning

May Company presentation

consumer products

The company’s platform is operated through its app which, once downloaded, offers the consumer the following product options:

RoarMoney. RoarMoney is a mobile banking account (powered by MetaBank (CASH)) offering direct deposit prepayment, bill payment, debit card rewards and no account minimums.

Investment account. MoneyLion provides customized portfolios based on an investor’s goals and risk profile through its relationships with Global X Management and Wilshire Advisors.

Credit Generator Plus. For $19.99 per month, MoneyLion provides a suite of credit enhancement services, including a credit enhancement loan and financial literacy tools. More than half of subscribers to this offer increase their credit score by 42+ points in 60 days.

Advance Instacash. The Instacash advance provides a short-term APR advance of 0% against expected earnings.

MoneyLion Crypto. This service offers the ability to buy and sell popular cryptocurrencies (Bitcoin, Ether, Litecoin, Bitcoin Cash) through its association with Zero Hash. MoneyLion shares fees collected by Zero Hash to facilitate cryptocurrency transactions.

Instant transfer fees generated by Credit Builder Plus and Instacash loans accounted for the bulk of MoneyLion’s fee revenue, which reached $116.1 million in FY21, or 68% of the total. Credit Builder Plus membership revenue generated $32.4 million in revenue for FY21, or 19% of the total. Net interest income from loans accounted for $7 million, or 4% of MoneyLion’s total FY21 revenue.

Revenue from enterprise partners through acquisitions

The balance of the Company’s FY21 revenue came from affiliates, where MoneyLion runs campaigns promoting various partners on its digital platform, as well as media and content production, services customer and associated license fees. The former generated $10.9 million in FY21 revenue, while the latter accounted for $4.7 million.

Business Partners

May Company presentation

Both numbers are expected to climb significantly in FY22 thanks to the two acquisitions the company has made since its IPO. In November 2021, MoneyLion purchased MALKA Media, which provides digital media and content production services for its [NOW] parent company to improve customer acquisition, as well as its own customers in entertainment, sports, games, live streaming, etc. .

Then in February 2022, MoneyLion acquired Even Financial, which connects consumers with the right financial product (credit card, loans, mortgages, insurance, etc.) from a network of more than 400 financial partners and… ‘about 500 distribution partners, including news sites, content publishers. , product comparison sites, etc. In return for expanding MoneyLion’s product reach, as well as diversifying its revenue mix, Even Financial received approximately $440 million in consideration, consisting of cash, convertible preferred stock and options.

These additions have already had a significant impact on the platform’s revenue mix, affiliate fees, enterprise SaaS contracts, advertising fees, and media and content management contributing 31% to MoneyLion revenue in 1Q22. This segment is expected to account for half of the company’s revenue by YE22.

Fintech marketplace

These acquisitions are part of management’s strategy to build the first financial super app, with its target market of 100 million middle-class Americans with annual earnings of up to $150,000 and FICO scores of up to at $750.250 billion in annual fees for the financial services industry.

The fintech banking space is teeming with online-only banks such as Ally Bank (ALLY), deep-pocketed fintech players such as SoFi Technologies (SOFI), as well as traditional banks now offering customers significant digital options. That said, MoneyLion, with its middle-class target market, has developed its Adj. net revenue by 117%, from $76.1 million in FY20 to $164.9 million in FY21. This result was more or less in concert with the growth total customers, which soared 129% to 3.3 million in YE21.

Share price performance

Despite its impressive progress, MoneyLion’s stock performance was abysmal, initially due to the post-de-SPACing effect and then risky trading. Fintech names, which carried values ​​in the stratosphere, were hit even harder. When MoneyLion began trading on the NYSE in September 2021, it was valued at nearly 11.1x FY21 earnings net of cash, although it had no prospect of real profitability until September. 2023. As such, its stock has been beaten ruthlessly in the risky environment, now down more than 85% since opening.

1Q22 results and outlook

Performance

May Company presentation

Despite the massive sell-off, due in part to the contribution from its acquisitions, the significant revenue momentum continued for MoneyLion, posting impressive results for 1Q22 on May 12, 2022. The company lost $6.0 million dollars (GAAP) and Adj. Negative EBITDA of $24.8 million on total net income of $69.7 million versus a loss of $73.4 million (GAAP) and Adj. Negative EBITDA of $1.2 million on total net income of $33.1 million in 1Q21, representing 110% revenue growth and a $5.3 million overrun to Street’s expectations.

ARPU increase

May Company presentation

Total customers jumped 117% year-over-year to 3.9 million as the company added 645,000 customers in the quarter, while total origins increased 116% to reach $408 million. More impressive was the $2 sequential increase in average annual revenue per user to $74, while customer acquisition costs fell $9 from 4Q21 to $16, driven largely by synergies with its business activities.

Total customer growth

May Company presentation

In addition, management reaffirmed its guidance for FY22 which included Adj. Negative EBITDA of $47.5 million on revenue of $330 million (based on the midpoints of the range), representing 100% revenue growth. Gross margins should be similar to FY21 at 60-65%. MoneyLion also expects EBITDA to be in balance at the end of FY22 and operating cash flow to be positive in 2H22.

Orientation Q2

May Company presentation

Review and analysts’ comments:

The company had cash of $185.0 million and debt of $90.0 million as of March 31, 2022. It also had $156.0 million outstanding to fund receivables created. It lost $8.7 million from operating activities in 1Q22 and as such should have enough cash to make it profitable.

Path to profitability

May Company presentation

MoneyLion’s next side street is positive with three analysts rating its stock as a buy and the other as an outperformer. Cantor’s outperform rating comes with a price target of $5, the same price target as Loop Capital which initiated the stock as new long last week. Craig Hallum ($10 price target) and Rosenblatt ($12 price target) are more bullish. On average, they expect the company to lose $0.29 per share (GAAP) on net income of $343 million in FY22, followed by a loss of $0.16 per share on net income of $567 million in FY23.

After buying 100,000 shares at $1.98 following the 4Q21 earnings report, CEO Diwakar Choubey repeated the same exercise following his company’s financial disclosures in 1Q22, buying 32,942 shares at 1 $.49 on May 20, 2022. These purchases are a veritable drop in the ocean for Mr. Choubey, whose personal account and family trusts hold more than 22.6 million shares, just under 10% of the company.

Verdict:

After trading at 11.1x FY21 revenue net of cash in its public debut, MoneyLion is now trading at 0.65x FY22E revenue net of cash, while expecting to become positive operating cash flow in 2H22 and to reach Adj. Breakeven EBITDA by YE22. Given its diversified revenue base, triple-digit growth and large target market, the valuation rubber band has been stretched too far. As a result, we see that MoneyLion shares are now attractively priced.

“Wealth does not consist in having great possessions, but in having few wants..”― Epictetus

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