Bank of America initiated coverage of online personal finance platform NerdWallet (NRDS) Monday with a buy rating and a $40 price target.
“We believe strong revenue and margin growth, vertical growth initiatives, international expansion, new financial services partnerships, and penetration of a large market opportunity will drive upside to the current stock price,” analyst Nat Schindler wrote in a commentary.
NerdWallet went public Nov. 14 with an offering price of $18. It recently traded at $20.80, down 8%.
“Our proprietary survey indicates that NerdWallet has relatively high brand recognition, and the company is able to attract audiences to its platform for a variety of products,” Schindler said.
“NerdWallet registered users among our survey respondents are highly engaged and the platform's notifications are highly effective.
“NerdWallet's $73 billion global total addressable market is massive with secular tailwinds from offline-to-online shifts. We believe that NerdWallet is well-positioned to capture market share across the different verticals.”
NerdWallet’s strengths include:
“1) A strong and unique brand driven by independent advice;” Schindler said.
“2) A large breadth of financial offerings, which drives high engagement levels;
“3) Growth driven by highly engaged registered users;
“4) International expansion opportunity; and
“5) An efficient high growth model with strong margins.
Investment risks for NerdWallet include:
“1) A highly competitive industry with low barriers to entry;” Schindler said.
“2) Significant exposure to macroeconomic and the overall finance industry;
“3) High vertical concentration;
“4) High software development cost capitalization; and
“5) Regulation and consumer data privacy concerns.”
For the first half of the year, NerdWallet posted a loss of $26.8 million, swinging from a profit of $3.1 million in the year-earlier period.