Three Canadian fintech stocks with a “Buy” rating
Fintech stocks have been hammered this year as the market continues to penalize companies linked to future growth prospects over current profitability. But there are still some bright spots in the room, according to Eight Capital analyst Adhir Kadve, whose just-released fintech commentary includes three Canadian names, all with Buy ratings.
The fintech conference Money 20/20 was held last week in Las Vegas, where Kadve attended and noted in his commentary the conference’s focus on Embedded Finance as a central theme along with discussions on the macro-level uncertainty in the economy and its impact on the economy. sector.
Kadve said he came away from the meetings with a better picture of how three companies in Eight Capital’s coverage universe are affected by current developments in the space, namely Lightspeed Commerce (Lightspeed Commerce Stock Price, Charts, News, Analysts, Finance TSX:LSPD), Payfare (Payfare Share Price, Charts, News, Analysts, Finance TSX:PAY) and Mogo Inc (Mogo stock price, charts, news, analysts, finance TSX:MOGO).
As for Lightspeed, Kadve said the Money 20/20 event talked about how innovation in the payments space continues to accelerate, but that integrated payments, particularly in the restaurant industry, remains underpenetrated, a sweet spot for LSPD, the analyst said. Kadve believes Lightspeed is poised to continue gaining market share in the complex restaurant market, with its platform offering merchants a broad set of products and modules, with significant cross- and up-selling opportunities.
“The underutilization of technology is poised to change over the coming years as macro uncertainty and labor shortages drive greater efficiency demands within the restaurant industry, spurring greater technology adoption. We believe these trends provide tailwinds to Lightspeed’s software business model + payments”, Kadve wrote in his report on 31 October.
The analyst also said Lightspeed’s internal capital offering, boosted by the acquisition of US-based ShopKeep, should prove a growth engine within the embedded finance wave. Kadve said that while LSPD currently offers its Capital product through a partnership with Stripe, the company now has the key capabilities to bring the product fully in-house.
“Lightspeed will expand the availability of the Capital offering throughout this and next calendar year, and we believe that once scaled, the Capital product will likely be margin accretive,” Kadve wrote.
At Payfare, Kadve said another theme at Money 20/20 was open banking, the framework that allows a person’s full financial data to be shared with other financial institutions or third parties. The trend has had a strong impact in Europe but is lagging behind in North America, which could change, Kadve said, as he saw “overwhelming support” for the initiative at the conference from private companies and US regulators.
That would be good for Payfare, Kadve said, as open banking would give potential creditors a better picture of a person’s financial profile and thus make the loan decision process more efficient.
“In our view, Payfare will be an important benefit for this theme. While Payfare’s platform currently works with Plaid to provide a better view of a user’s finances, any regulatory move to adopt open banking in the US will further enhance this view. Remember that a product that excites us on Payfare’s roadmap is the ability to provide microcredit to the broad base of users. We believe that a microcredit product together with open banking has a significant impact on Payfare and its partners,” wrote Kadve.
On the digital asset front, one of Mogo’s product offerings, Kadve pointed to a McKinsey consumer trends survey that found the use of digital assets was generally flat year-over-year, with a slight increase in ownership levels from 13 percent of respondents to 15 percent. The analyst said given the broader pullback in cryptocurrencies, the appearance of stability in ownership and ongoing interest is encouraging. Kadve also noted that the survey found that respondents cited “investment purposes” as the most common reason for ownership of digital assets, while volatility in the sector was found to be the main reason for non-ownership.
“While there is no direct read-through to our coverage universe, we note that Mogo continues to have exposure to the digital asset industry via its 37 percent stake in Coinsquare,” Kadve said.
With the update, Kadve repeated the following ratings and target prices for the three shares. All estimated returns are as of the report’s publication date.
Storage: Lightspeed Commerce
Rating: Buy
Target Price: $47.00
Estimated one-year return: 79 percent
Storage: Payfare
Rating: Buy
Target Price: $17.00
Estimated one-year return: 278 percent
Storage: Mogo
Rating: Buy
Target price: $3.25
Estimated one-year return: 207 percent
