Stellar Growth by OppFi Inc
Think about the last time you went to your bank to discuss a service. For myself, it has literally been years. It’s not that I don’t welcome personal interaction; it’s simply that I’d rather deal with my banking needs via computer or smartphone.
The global financial technology (fintech) market is expected to spike to $326.0 billion by 2026. This estimate might be somewhat conservative, given the rapid adoption of smartphones and other mobile devices. (Source: “Global Fintech Market Research Report,” Market Data Forecast, last accessed December 1, 2021.)
Take the case of OppFi Inc (NYSE:OPFI), which debuted on the stock market in November 2020 at $9.90 per share via a merger with the special-purpose acquisition company FG New American Acquisition Corp.
OppFi Inc aims to serve consumers that are under-served by mainstream banks. Its fintech platform allows users to digitally access financial products such as loans and credit cards.
OPFI Stock Chart: Time for Bottom-Fishing?
OppFi Inc’s stock chart stock looks extremely bearish, as evidenced by the initial breakdown from a tight distribution channel in July.
OppFi stock mounted a rapid bounce after declining to the $6.00 level in August, managing to recover its previous support level at $9.50 to $10.50. But the rally failed to hold, and OPFI stock steadily declined in a downward channel.
OppFi stock did recently break channel resistance, but again the move wasn’t sustainable. To make matters worse, shares of OppFi Inc subsequently plummeted in a falling knife pattern below channel support to a new low of $5.16 on November 23.
Chart courtesy of StockCharts.com
At this point, OPFI stock is extremely oversold. This should allow OppFi stock to attract some buying support, but considering the weak relative strength, sustainability will remain an issue.
Revenues Approach $500 Million
OppFi delivered adjusted revenue growth of 20.5% to $323.0 million in 2020. (Source: “OppFi Reports Fourth Quarter and Full Year 2020 Financial Highlights,” OppFi Inc, March 22, 2021.)
In the same year, the company produced adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $99.0 million.
Better yet, OppFi Inc is profitable on both a generally accepted accounting principles (GAAP) and adjusted basis.
Analysts estimate that the company’s revenues will rise by 10.3% to $356.2 million this year before surging by 25.7% to $444.9 million in 2022. That implies a compelling forward revenue multiple of 1.2 times. (Source: “OppFi Inc. (OPFI),” Yahoo! Finance, last accessed December 1, 2021.)
OppFi is targeting adjusted EBITDA between $121.0 and $125.0 million for this year. Moreover, estimates call for OppFi Inc to earn an adjusted $0.78 per diluted share this year and $0.83 per diluted share in 2022.
If OppFi Inc can deliver anywhere close to its revenue and earnings estimates, its valuation would be attractive and supportive of a much higher share price.
The tailwinds for fintech services will only accelerate higher, and that bodes well for OPFI stock investors. As a risk/reward trade, given that OppFi stock is 55% off its high, it’s worth a look for aggressive risk capital.