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MoneyLion's (NYSE:ML) bulls would be excused for capitulating after the stock went down some 30% following the completion of its go-public merger with Fusion Acquisition Corp at what was an equity value of $2.9 billion. Like other recent deSPACs, the company raised less money than initially planned with a redemption rate of around 74%. And while this aggressive move downwards on the back of the merger closure would seemingly be enough to end the bullish dream, the company still retains a not immaterial retail shareholder base who have one thing in mind; the long-term fundamental story.
Quite similar to SoFi (SOFI) and built on the rapid uptake of digital financial services in the United States, MoneyLion is currently experiencing rapid revenue growth. This is as the fledgling fintech upstart, like its peers, has found itself in a position to take a percentage of markets historically reserved for traditional banks. The opportunity is large and growing and MoneyLion intends to capitalize on this with its multi-product platform that allows its customers to deposit money, get access to near 0% APR but low nominal value cash advances, credit building, and a fully managed investment account.
Its efforts and hopes look to be paying off with fiscal 2021 second-quarter results that saw adjusted revenue grow by 114% year-over-year as adjusted gross profits grew by 155% over the same period. Adjusted gross profit margin also improved by 500 basis points YoY and 100 basis points sequentially over the prior quarter. The strong results laid the foundation for MoneyLion to upwardly revise its fiscal 2021 revenue estimates by 8% to $155 million from the prior numbers with 2022 and 2023 seeing revisions of 10% and 24% respectively.
MoneyLion September 2021 Investor Presentation
The company has also moved to join the crypto phenomena with the September launch of crypto trading and a further launch of BNPL (Buy Now Pay Later) planned for the fourth quarter of this year. These put in place the necessary future boosters to current operational momentum. MoneyLion's management hopes that these would be sufficient to create value in the years ahead even as their company has been a victim of the indiscriminate selling and collapse of deSPACs. While the early 2021 SPAC bubble could be defined by greed and unhinged euphoria that would see stocks nearly double to just the announcement of a merger target, the current reality is too much of a dichotomy and has turned into excessive dread. This will likely not be the situation in a few years.
Fiscal 2021 Second Quarter Results Look Strong
MoneyLion realized revenue of $36 million for its last reported quarter, this was an increase of 114% from the year-ago quarter and was driven by a 123% growth in new users and cross adoption of its financial products.
MoneyLion September 2021 Investor Presentation
However, the company is currently not profitable with net loss increasing to $12 million, up sequentially from $2 million in the first quarter of the current fiscal year. This remains a core risk of loss-making fintech firms that might find it difficult to achieve the required profitability due to the strong level of competition inherent in the sector.
With common shares currently changing hands for $6.96 per share, the company's market capitalization stands at $2 billion. This is down from its near $3 billion equity value when it announced it was going public. Hence, with full-year 2021 revenue guided to be $155 million, the company's forward price to revenue multiple stands at around 13x. While seemingly high, revenue is set to grow to at least $285 million in fiscal 2022, bringing down its fiscal 2022 price to revenue multiple to 7x, then 3.8x using fiscal 2023 revenue.
An Exciting Company
MoneyLion's bulls continue on as the shares crumble because the financial context looks strong and the broader macro picture for the company's products look positive. And while the company has been punished for going public via SPAC, the current valuation set against expected future growth is attractive. The uncertainty for bulls that continue to hold is whether it can build on and maintain current operational momentum and whether this will be enough to reverse the downward trend.
While I held off on buying MoneyLion previously, the triple-digit revenue growth combined with the coming launch of new products and the more than 30% discount on the common shares is too attractive to ignore. Very rarely in the stock market do you get a crossover between growth and future value. So I will look to buy shares in the company and will possibly add to this position if the stock continues to fall. Every chart tells a different story depending on what time frame one selects. A downward oscillation in the short term can turn into an upward trendline when viewed on a longer time frame. MoneyLion's fundamental bulls are hoping this comes to be.
