Remitly Global (RELY)

We’ll start with Remitly, a financial services company operating in the international transfer payments niche. The company offers customers a secure platform to both send and receive cash transfer payments across international borders. Users access the service through a mobile app, and benefit from lower fees than are offered by banks. Remitly’s niche is popular with immigrant communities around the world, and the company operates in 170 countries.

This company has been on the public markets for slightly over one year – it held its IPO in September of last year. Since the IPO, Remitly has seen its share price fall by 79%; during 2022 alone, the stock is down 51%.

Remitly’s share losses have come even as the firm has been successful in expanding business and growing revenues. Remitly saw a top line of $169.3 million in the recently reported 3Q22, for a year-over-year increase of 40%. The revenue gain was supported by a 49% y/y increase in active customers, from 2.6 million to 3.8 million, and a 44% y/y jump in send volume, to a total of $7.5 billion for the quarter. Remitly is guiding toward 2022 y/y revenue growth of 38% to 40%, and is on track to achieve that.

At the same time, however, the company’s quarterly net loss remains high. The Q3 loss was reported as $33.1 million, compare to $12.9 million in the year-ago quarter.

Covering Remitly for Goldman Sachs, analyst Will Nance takes note of the risks – and goes on to explain why this company is likely to beat them.

“Taking a step back, the bear thesis on RELY since they went public has been a generalized remittance bear thesis around competition, price compression, and poor unit economics; against that backdrop, RELY has maintained 50% customer growth, expanded transaction margins, and reduced CAC by 20%,” Nance explained.

“While in past quarters, the market has been unwilling to reward RELY’s outperformance on these generalized concerns, we believe the market should begin to reward the company for their solid execution and the secular cash-to-digital tailwinds behind their business as the company maintains healthy growth rates and scales into profitability in the coming quarters,” the Goldman analyst added.

Quantifying his prediction, Nance gives RELY stock a Buy rating with a $16 price target to suggest ~65% upside in the coming year.

Overall, there are 4 recent analyst reviews on record for Remitly, and they’re all positive – giving the stock its Strong Buy analyst consensus rating. The shares are selling for $9.71 and the $14 average price target implies a 12-month gain of 44%.