MoneyMe shares soar after profit results beat forecasts

MoneyMe's share price is up 40% this month following a new BNPL release and solid profit results.

Australian investors hungry for fintech have turned their attention to small-cap player MoneyMe (MME) this week after better than expected profit results.

Australian fintech MoneyMe (MME) today beat expectations to report annual net profits (NPAT) of $1.3 million, up 300% from the year prior. Revenue was also up 49.5% to $47.7 million, surpassing its own revenue guidelines for the FY20/21 year by around 5%.

Top analyst Morgans had previously forecast a flat net profit (normalised) of $0.3 million thanks to COVID-19 challenges and a price target in July of $1.66.

Following the report, MME's stock price jumped more than 18% by 1:30pm Wednesday to $1.73, up an impressive 45% in the last month.

Other major payment technology stocks Afterpay (APT) and Zip (Z1P) have also seen prices soar this week following new announcements. Afterpay's share price is up 20% this month after announcing expansion plans into Europe, while Z1P is up 25% today alone after declaring plans to partner with eBay.

Why is MME's price soaring?

MoneyMe, which listed on the Australian Securities Exchange (ASX) in December last year, is best known as a personal loans provider. More recently, it launched virtual credit card Freestyle and its ListReady service, which allows home owners and agents to defer marketing costs.

However, its big moment for investors this year was the launch of its consumer buy now pay later (BNPL) platform MoneyMe+ at the start of August.

The newest platform, which has a team of ex-Zip employees at the helm, allows customers to spend up to $50,000 and pay at a later date.

Following the wild success of Afterpay (APT) and Zip (Z1P) stocks, any BNPL feature is clearly a winner for Australian investors.

After MoneyMe announced the release of MoneyMe+ at the start of August, its share price jumped 20% by the end of the day.

Is its price sustainable?

MoneyMe's main source of revenue is currently generated through its personal loan product and its Freestyle Virtual Credit Account.

Total customer loans increased 53% from the year prior to $178.5 million and its gross loan book grew by 52.7% to $133.6 million in FY20.

However, lenders face a number of challenges this year thanks to COVID-19 and record low interest rates. Earlier this year, S&P Global predicted credit losses by Australia's banks would double this financial year amid record unemployment levels.

While MoneyMe+ impressed the market, the BNPL space is already filled with a growing list of well-established players, including Afterpay, Zip, flexigroup and Openpay, to name a few.

BNPL customers are also made up of a younger customer base, which have been among the hardest hit by unemployment during COVID-19. We may only get a clear view of this impact once government support measures come to an end.

As for future growth plans, MoneyMe says it plans to continue to expand its market share by focusing on innovation in its existing range of products, which includes Freestyle, ListReady, RentReady and its loan and BNPL products.

MoneyMe CEO Clayton Howes had this to say: “The financial year ended 30 June 2020 was a significant year in the history of MoneyMe. We successfully completed our initial public offering, enabled Freestyle with a virtual Mastercard, launched ListReady and RentReady, entered new verticals, achieved accelerated growth and exceeded our Prospectus forecasts.

"MoneyMe operates in an agile development environment and has created a diversified customer base with a targeted and low cost origination growth strategy which enables us to minimise our credit risk exposure and quickly adapt to changing market conditions."

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