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NerdWallet Initiated Buy With $40 Price Target at Bank of America

'[Strong] revenue and margin growth, vertical growth initiatives [and] international expansion' will boost NerdWallet, Bank of America says.
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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.