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JPMorgan cuts Remitly stock target, keeps overweight on customer growth

EditorEmilio Ghigini
Published 01/08/2024, 11:15
Updated 01/08/2024, 11:16
JPM
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On Thursday, Remitly Global Inc (NASDAQ:RELY) had its stock price target adjusted by JPMorgan (NYSE:JPM) to $19.00, a decrease from the previous target of $28.00. Despite this change, the firm maintained its Overweight rating on the stock.

Remitly has reported a significant increase in customer additions, which supports the effectiveness of their marketing strategies and the impact of seasonal trends that were previously underestimated. The company's revenue has seen a 31% increase, surpassing the expected guidance of less than 30%. M, customer growth remained high at 36%, even with a slight reduction in take rate compared to the projected model due to a change in the mix of services used.

The surge in customer growth is attributed to improved marketing efficiency through elasticity testing and positive word-of-mouth. Notably, most of the new customers acquired in the second quarter sent remittances to countries outside of Remitly's three largest markets, which include the US-to-Mexico, US-to-India, and US-to-Philippines corridors. This diversification is beneficial as it reduces volatility and exposure to specific foreign exchange or macroeconomic events in local economies.

The second quarter did see a rise in fraud-related costs, which increased transaction expenses for the first time since the third quarter of 2022. Still, Remitly has since addressed the fraud issue. The company continues to demonstrate leverage across its profit and loss statement, as evidenced by decreased costs in customer service, technology and development, and general and administrative expenses as a percentage of revenue year over year.

Remitly has updated its guidance, raising the lower end while the midpoint increase aligns with the consensus beat. However, the guidance for the second half of the year is lower than previous estimates, which might be conservative.

Despite the reduced price target, the outlook for Remitly remains positive due to robust customer additions and an outlook that can potentially be exceeded, balanced by the recent fraud issue and the perception of a lower take rate. The announcement of the Chief Financial Officer's transition due to family relocation was unexpected, but an orderly transition is anticipated.

In other recent news, Remitly Global Inc has been the subject of attention from financial analysts and investors alike. The company's first-quarter earnings report showcased a 32% year-over-year revenue surge to $269 million, with active customers also growing by 36%, totaling 6.2 million. This strong performance was further underscored by a significant rise in adjusted EBITDA, which soared over 250% to reach $19 million.

Remitly has also been the subject of price target revisions by both JPMorgan and BMO Capital. JPMorgan adjusted its price target to $19.00, down from $28.00, while maintaining an Overweight rating. BMO Capital, on the other hand, maintained its Outperform rating, but lowered its price target to $24 from $28.

These recent developments reflect the company's robust growth potential and strong operational leverage. Despite some challenges, including a reported increase in fraud-related costs and a slight revenue shortfall due to seasonal trends, Remitly has demonstrated resilience and an ability to adapt. The company's ongoing commitment to customer acquisition and operational efficiencies, as noted by BMO Capital, suggests a positive outlook for the future.

InvestingPro Insights

In light of JPMorgan's updated price target for Remitly Global Inc (NASDAQ:RELY), real-time data from InvestingPro provides further context to the company's current financial landscape. The company's market capitalization stands at $2.54 billion, indicating its significant presence in the financial sector. Despite facing challenges in profitability, with a negative P/E ratio of -24.87, Remitly's revenue has shown robust growth, increasing by nearly 40% over the last twelve months as of Q1 2024. This growth is a testament to the company's expanding customer base and effective market strategies.

InvestingPro Tips suggest that while Remitly has not been profitable over the last twelve months, analysts are optimistic, predicting profitability within this year. Additionally, the company's liquid assets are reported to exceed short-term obligations, providing a cushion for operational needs. However, the stock price has seen a significant decline over the last three months, which might raise concerns for potential investors.

For those seeking a deeper analysis, InvestingPro offers additional tips on Remitly's financial health and future prospects. With a high Price/Book multiple of 4.63, the company's stock is trading at a premium compared to its book value, which could be a point of consideration for value-focused investors.

For a comprehensive understanding of Remitly's financial position and future outlook, including an array of InvestingPro Tips, interested readers can explore further at https://www.investing.com/pro/RELY.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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