Home Message company MoneyLion is down about 80% since its IPO. Is it time...

MoneyLion is down about 80% since its IPO. Is it time to buy?

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Jthe financial app for consumers SilverLion (NYSE:ML) went public through a special purpose acquisition company (SPAC) in September and has been underwater ever since. The company is now down about 80% since starting independent operations.

Since its fourth quarter earnings report on March 10, the stock has fallen another 18% and now has a market capitalization of $435 million, a far cry from the $2.4 billion enterprise value that she had when the SPAC deal was first announced. Is this dejected fintech stock a buy at these levels? We’ll take a look.

The model

I would describe MoneyLion as a kind of hybrid between fintechs SoFi and David. The company offers many financial services, including cash management accounts; online crypto and investment capabilities; Assurance; interest-free cash advances; and a number of lending capabilities, such as mortgages, student loans, personal loans, and credit cards.

MoneyLion recently completed two acquisitions. It has purchased content company Malka Media, which will help it better interact with its users by providing financial information, personal finance advice and other helpful tools to customers.

Image source: Getty Images.

Next, MoneyLion bought fintech company Even Financial, which is a middleman between businesses and financial service providers. This will help push MoneyLion into Even’s vast network of news sites, credit comparison tools and “into the cross-selling feeds of hundreds of financial institutions,” said Dee Choubey, CEO of MoneyLion.

On the other hand, the company will now be able to offer more third-party financial products to its customers, be it loan offers, insurance or different lifestyle products. A great thing to understand about MoneyLion is that it forms partnerships with many third parties to provide its wide range of financial products.

The company has a diversified source of income. It makes the majority of its money from fee income from its interest-free cash advance product and its subscription to Credit Builder Plus, which essentially gives users access to all of the platform’s different offerings.

It also collects interchange fees when consumers make debit card payments from their MoneyLion cash management accounts. The company also derives revenue from its managed investment program and third-party marketplace, where it partners with companies to advertise their products and services to MoneyLion members. And it derives interest income from its secured loan product.

The business grows

MoneyLion is showing solid growth in many ways. The company reported adjusted revenue of $54 million in the fourth quarter, its best quarter ever, up 29% from record adjusted revenue in the third quarter of 2021.

Also in the fourth quarter, MoneyLion added 600,000 customers, which it defines as those with at least one MoneyLion financial account. That’s more than SoFi, which is also coming out of a record in the fourth quarter on its own, and Choubey said acquisition costs per customer are in the low $20 range, which is also very good.

The average revenue per user (ARPU) is $70, which is fine, but it drops to $135 when customers use more than one product and $235 when they use more than two products.

MoneyLion generated revenue of over $171 million in 2021 and recorded an adjusted earnings before interest, tax, depreciation and amortization (EBITDA) loss of over $67 million and an adjusted loss of $75.8 million. dollars. In 2022, management expects to nearly double adjusted revenue to $330 million and break even adjusted EBITDA.

When I review companies that have gone public through a SPAC, I always like to go back to their first investor pitch to see if they hit their original projections (spoiler alert – this rarely happens). But MoneyLion actually did a decent job.

When it first presented to investors in April 2021, the company expected to end 2021 with 2.6 million customers and adjusted revenue of $144 million. Not only has MoneyLion far exceeded those projections, it is also on track to far exceed initial revenue estimates for 2022. The only caveat is that customer acquisition costs are now at least double what they were in the first quarter of 2021.

Is MoneyLion a purchase?

Overall, I’m not too impressed with MoneyLion’s products. I don’t see anything unique here, and I really don’t like the idea of ​​charging subscription fees basically to use products that customers really can get for free. The company is still a long way from profitability, too.

The other issue is that its provision for potential losses on loans receivable appeared to climb to $60.8 million in the fourth quarter from $36.6 million at the end of the third quarter. The market is very concerned about consumer debt right now as the economy faces rising inflation and higher interest rates. I did not see an average FICO number of MoneyLion customers in regulatory filings, but I guess that covers the whole spectrum.

By going public through a SPAC, MoneyLion also has options and warrants outstanding which, when exercised, would dilute shareholders, although the warrants cannot be exercised until the stock is n reaches $11.50. At a recent price of $1.90, it still has a long way to go.

In the end though I wouldn’t bet the house on it fintech, I am tempted to nibble or take a small position in MoneyLion at these levels. The company has met some of its initial SPAC projections, which is rare, and is showing very solid growth with its past and current guidance. The stock trades at less than 1.5 times forward earnings, which is a nice risk-reward proposition.

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Bram Berkowitz has no position in the stocks mentioned. The Motley Fool recommends Fair Isaac (FICO). The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.