On Tuesday, Deutsche Bank (ETR:DBKGn) initiated coverage of Flywire (NASDAQ:FLYW), a prominent global payments company, assigning a Buy rating and setting a price target of $27.00. The firm recognized Flywire's leading position in providing high-value payment solutions across various industries, including Education, Healthcare, Travel, and key B2B markets.
Despite Flywire's stock experiencing a pullback following its third-quarter earnings miss in 2023, Deutsche Bank views the decline as an opportunity for investors.
"We believe the disappointing print was driven by idiosyncratic, not structural issues and think consensus forecasts have been sufficiently reset to weather any lingering softness into the early part of FY24," said the analysts.
Deutsche Bank's outlook for Flywire is optimistic, citing the company's distinct competitive advantage as an integrated payments provider in significant and growing markets. The bank expects Flywire to achieve a sustainable long-term organic revenue growth rate of approximately 30%, with the potential to scale adjusted EBITDA margins from the current low double digits to over 25% on a normalized basis.
The current valuation of Flywire, at roughly 5 times the bank's estimated calendar year 2025 enterprise value to gross profit, suggests a discount of about 25% compared to a group of fintech peers. Deutsche Bank contends that this discount is not justified given Flywire's robust competitive position and trajectory for organic revenue growth, which supports their positive stance on the stock and the establishment of the $27 price target.
InvestingPro Insights
In the context of Flywire's potential, it's worth examining the financial health and market performance of other players in the fintech space, such as Lyft (NASDAQ:LYFT). Lyft's recent metrics and analyst insights from InvestingPro shed light on the company's financial position and market sentiment.
Lyft's market capitalization stands at $4.95 billion, indicating its substantial presence in the industry. Despite not being profitable over the last twelve months, with a negative P/E ratio of -5.96, analysts are expecting a turnaround, forecasting net income growth this year. This optimism is reflected in the company's stock price, which has seen a strong return of 19.56% over the last three months, suggesting a recovering investor confidence.
Revenue growth remains a bright spot for Lyft, with an increase of 11.93% over the last twelve months as of Q1 2023. However, challenges are evident in their balance sheet, where short-term obligations exceed liquid assets, posing potential liquidity risks. An InvestingPro Tip that stands out is Lyft's ability to hold more cash than debt, which could provide a cushion against financial headwinds.
For investors considering the broader fintech market, Lyft's performance and prospects could serve as a comparative benchmark. There are additional InvestingPro Tips available that delve deeper into Lyft's financials and market position, including analysis on price movements and profitability predictions. Interested readers can find a total of 9 additional tips on Lyft by visiting https://www.investing.com/pro/LYFT.
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