Mogo Inc.

Mogo Inc. (TSX: MOGO) is a Canadian based financial technology company, which offers finance applications to consumers with solutions that help them to control their financial health.

Key Updates:

• Tremendous growth in the subscription segment: The company reported a strong momentum from its subscription segment, driven by increasing penetration of the existing member base coupled with expansion across the international geographies. Moreover, the launch of new products and the continued growth of the member base also supported the above growth. Notably, subscription and services revenue stood at CAD 9.487 million and CAD 23.707 million, respectively, higher than CAD 4.206 million and CAD 14.553 million in pcp.
  

Source: Company Presentation 

• Technical showing a possible up move: On a daily chart, the 14-days RSI of MOGO is hovering near its oversold zone of 35.28, which might lead to a possible price appreciation in the coming trading session. Moreover, the stock is trading near the lower band of its 20-days Bollinger band, which also suggest a price uptick from the current trading level.
  

• New acquisition update: In the third quarter of FY21, the company reported the acquisition of Canadian registered investment dealer, Fortification Capital Inc., which is expected to provide a free stock trading platform to its customers and would provide necessary components on the regulatory and technology side to complement its existing offerings.

Q3FY21 Financial Highlights:

• MOGO announces its quarterly result, wherein the company posted its revenue of CAD 15.439 million, jumped from CAD 9.774 million in the previous corresponding period (pcp). The increase was driven by exponential growth from Subscription and services revenue (CAD 9.487 million v/s CAD 4.206 million in pcp).
• Gross profit surged to CAD 12.178 million from CAD 9.117 million in pcp, thanks to the elevated revenue, partially offset by higher cost of revenue.
• The quarter was marked by higher Technology and development costs, increase in Marketing expense and higher General and administration.
• The group reported its net loss of CAD 9.813 million, as compared to a net profit of CAD 1.019 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: The company reported a surge in the input costs, which has resulted in a depressed bottom-line, and the continuation of the above trend is likely to dampen the upcoming performance. 

Valuation Methodology (Illustrative): EV to Sales

Stock Recommendation:

The management expects the positive revenue growth trend to continue through the fourth quarter of FY21 as well, supported by the positive impact from its recent acquisitions made during the year. We have valued the stock using the EV to Sales-based valuation methodology and have arrived at a double-digit upside (in percentage terms).  For the said purposes, we have considered peers Sunlight Financial Holdings Inc, Lightspeed Commerce Inc and Axis Auto Finance Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of MOGO at the current market price of CAD 4.30 at 9:52 am Toronto time on December 22, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary:

One-Year Technical Price Chart (as on December 22, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.