On Wednesday, UBS maintained a Buy rating on Flywire (NASDAQ:FLYW), a leading provider of global payment and receivables solutions, and increased the price target to $34.00 from the previous $33.00.
This adjustment follows Flywire's announcement of strong fourth-quarter performance, surpassing key performance indicators (KPIs) such as volume, revenue less ancillary services, adjusted gross profit, and adjusted EBITDA.
Flywire's Q4 results showcased robust growth, attributed to new client acquisitions in the UK, effective monetization of payment volumes, increased utilization of payment plans, and an advance in tuition payments from Canada, which notably impacted revenue.
Despite a conservative Q1 guidance due to the Canadian international student study permit caps, Flywire's full-year 2024 outlook is expected to surpass initial estimates, even considering a revenue headwind from the Canadian market.
The company's guidance included a potential low-teens million dollar revenue impact from the Canadian market, which represents approximately 3-4% of the company's revenue.
This challenge is mitigated by Flywire's strategy to recover potential losses by catering to international students at other global universities. The assumption is based on the company's dialogue with its Canadian agent network and does not apply to graduate-level students.
Flywire's management has also provided an adjusted EBITDA forecast that exceeds market expectations at the mid-point. However, the anticipated margin expansion of approximately 320 basis points is modest compared to the 300-600 basis points range projected during its 2022 investor day.
This cautious stance allows the company to adjust operating expenses in response to early-year revenue trends.
UBS highlights Flywire's multiple positive attributes, including high growth potential, resilient target markets, a clear trajectory for EBITDA margin growth, emerging verticals with upside opportunities, limited competition in its niche sectors, and the company's appeal as an acquisition target for diversifying end-market presence.
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