PGY - Pagaya: An Undervalued Fintech Powerhouse

2024-05-13 11:44:54 ET

Summary

• Pagaya is expanding its presence in the fast growing POS financing vertical which could generate $6 billion in revenue by 2027.
• Interest rate cuts could lead to more network volume if Pagaya increases its conversion rate due to banks loosening their lending standards.
• Pagaya is looking to reduce its risk exposure by introducing new funding models and changing its retention method.
• My price target for Pagaya is $30.6, implying 141% upside from current levels.

Since posting strong Q1 results, Pagaya Technologies Ltd. ( PGY ) has climbed nearly 21%. The company showed strong growth in network volume, revenues, and adjusted EBITDA, while also sharing a strong full year guidance. In my opinion, Pagaya could continue witnessing substantial growth due to its expansion in the fast growing POS financing vertical, with 3 banks and POS providers set to be integrated into its network in the next 12 to 18 months. In addition, Pagaya could benefit from potential interest rate cuts since it could increase its conversion rate due to banks potentially loosening their lending standards. These factors could be tailwinds to Pagaya’s network volume, which would reflect on its future revenues....

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