Shares of Xoom Corp (XOOM) skyrocketed nearly 60% from its initial offering price of $16 to close at $25.49. The IPO raised over $100M and gives the company a market cap of around $800M based on Friday's close. Detailed financials can be found in its recently filed S1.
Xoom is an interesting company with just over $80M in revenue last year, $50M in 2011 and $32M in 2010. It has been growing at over 50% for the last several years. In none of the years has the company been profitable. Here are some additional stats from the S1 filing. They did $3.2B in transactions in 2012 on 6.6M transactions and finished the year with 776K customers. All these numbers were up significantly from 2011 and are expected to continue to grow going forward.
So what does Xoom do? They provide an online and growing mobile business that allows a consumer to consumer international money transfer method. This can be easily done from the comfort of your home or securely through your mobile device. This is similar to services provided by Western Union (WU) and MoneyGram International (MGI). Xoom claims the main advantage they bring to the table is their unique combination of convenience, speed and cost-effective pricing of their services.
The area I expect to see the most growth and that has the highest potential is in the mobile payments aspect of their business. Slightly over a year ago they launched their mobile strategy and in the last quarter over 25% of transactions came from a mobile device and 22% of revenue. Using their technology and expanding into adjacent mobile payment markets is the key for growth going forward. Companies like Square, which may IPO in 2013, is going to go public with a valuation likely in the low billions and is an example of how Xoom could quickly expand into adjacent mobile payment markets with a client base of 776K active users. A recent article by Chris Katje, Xoom Inc. IPO: Digital Money Transfer Company Is A Buy, gives an excellent synopsis of the companies business.
Another stock I'm watching in the quickly growing mobile money transfer space is Spindle Mobile (SPDL.OB). A recent article written by Benjamin Pandos, Spin Up Massive Profits In Mobile Payments With Spindle, Inc., highlighted Spindle as a new player in the online and mobile payment processing space. While Zoom focuses on transferring of money from one persons account to another overseas account this is just one of the many things that Spindle can do. Spindle provides a backbone for companies such as banks and financial institutions to allow their customers a frictionless way to transfer money via mobile or the internet. In the last several months Spindle has signed deals and partnered with companies like Elephant Talk (ETAK), Acculynk, CheckAlt, Utiba, Bank of America (BAC), NCR (NCR) and Integrated Payments. Spindle's business model is to take a small fraction of each transaction in this exploding market segment and based on recent deals the number of transactions they are processing should ramp very quickly as the space evolves over the next few years.
Xoom started off its first day of trading with a rocket like climb. Going forward it will be interesting to see what types of partnerships and adjacent markets it can quickly move its technology into. From the Gartner report on Mobile Payments:
Gartner's report Forecast: Mobile Payment, Worldwide, 2009-2016, released earlier this year predicts that worldwide mobile payment transactions will grow from 62% over the year from $105.9 billion to $171.5 billion this year. From 2011 through 2016, the global mobile transaction market is estimated to grow to $617 billion, and Gartner projects an annual growth rate of 42%. Gartner further estimates that mobile transaction services will have more than 448 million users by 2016.
There is a paradigm shift occurring where the traditional wallet one carries in his back pocket will soon be replaced by modern day mobile devices. Companies like Xoom and Spindle are on the forefront of a revolution that will eliminate today's wallet and credit cards. With the rapid adoption of smart devices companies participating in the next wave of this revolution are ones to keep an eye on and could present tremendous investment opportunity going forward.
Disclosure: I am long SPDL.OB.