invest in Méliuz (CASH3) has its ups and downs, but the stock is still attractive and worth the thrill, assesses the Great Investments.
This week, the broker began covering the company’s shares with a “buy” recommendation and a target price of BRL 2.45.
Genial’s analysis team sees Méliuz’s trajectory on the stock exchange as a roller coaster of emotions.
“In a roller coaster, the cart is not motorized, that is, all the movement of this exciting toy is the exclusive result of the action of the force of gravity. Therefore, the route has a very steep climb at the beginning of the route, followed by a huge descent. And so it was with Méliuz”, explain Igor Guedes, analyst in the Consumer, Retail and Technology sector, and Eduardo Nishio, head of Research and Finance.
What led to the fall in stocks?
Analysts remember well the moment when Méliuz went from peak to collapse with effects until the present day.
In August of last year, recalls Genial, Méliuz reported a loss of R$ 6.7 million, breaking the sequence of three consecutive profits.
“While the average CAC (customer acquisition cost) of Nubank and Inter Bank was BRL 26.75 and BRL 27.76 in the first quarter of 2021, respectively, Méliuz’s was close to BRL 19.50. This CAC started to rise from the second quarter of 2021, as the company moved from positive net income to report a loss, reaching close to R$45 in the fourth quarter of 2021, a significant increase of 130% in two quarters, going against other fintechs that had more complex execution businesses and, even so, started to lower the CAC or kept it at a similar level”, comment Guedes and Nishio.
The analysts also point out that, within the technology sectorit is not common to see companies in the growth phase reporting profits, which may explain the soaring of shares in the first few months.
It is worth remembering that Méliuz debuted in B3 (B3SA3) with its shares priced at R$10 each. At its peak, the share of tech reached R$74, before the stock split.
In Genial’s assessment, the deterioration in short-term profitability can be explained by the deterioration of the profit margin to increase the spread between the commission the company receives from partner retailers (take rate) and what it conveys from cashbackin an attempt to capture more growth in the customer base.
Another factor that may have affected the paper’s performance is the increase in competition in a poorly differentiated market, adds the brokerage.
Riding the roller coaster
When purchasing the Bank AccessMéliuz began to put into practice its plan to become an increasingly complete service platform, going beyond cashback.
The Méliuz ecosystem now has credit and debit cardsBesides payments and even investments in cryptocurrencies.
Genial looks at this strategy with optimism. The brokerage says that this initiative could represent “the starting point of the ascent of the roller coaster after the sharp drop”.
According to Genial, the card co-branded with the Pan Bank (BPAN4) was a preparation for tech to gain more experience in the financial services vertical to launch into the sector later.
“The company has been showing the understanding that investment and generation of revenue lines in financial services should be the biggest driver growth of Méliuz in the coming years”, comment the analysts.
In the assessment of Guedes and Nishio, the company, managing to unify the entire application ecosystem, must better control the user experience and avoid increasing the churn rate, which accumulates a 10% retraction of active users, even with the number of total users on the rise.
“We observed that the core business The company’s current strategy, which is the shopping mall vertical through cashback, should serve much more to continue attracting and increasing the customer base, but the profitability of these customers must be done through the financial services vertical, offering the customer a more comprehensive than consumption“, they complete.
Genial believes that Méliuz will begin to gain scale between the first and second quarter of 2024, reaching the mark of 350 thousand credit card issues per month.
“If the company manages to execute well and gradually grow the portfolio, we see good potential”, conclude Guedes and Nishio.
The broker thinks that the recent strong devaluation of the paper creates a discount to leave the stock at a reasonable level in relation to its potential for upside vs. execution risk. For Genial, although the risk is high, the upside is proportionate to that risk.
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
