What happened
Shares of money transfer company MoneyGram International (MGI) shot sharply higher in the first half hour of trading on Oct. 30. At one point that gain reached nearly 32%, though by 10 a.m. EDT or so the shares were up "just" 26%. The reason for the excitement was the company's after-market earnings release on Oct. 29.
So what
There are a couple of notable takeaways from MoneyGram's third-quarter results. First, overall revenue was basically flat year over year in the period, but money transfer revenue was up roughly 5%. So the core of the company's business is doing OK (more on this in a second). Adjusted earnings, meanwhile, came in at $0.16 per share compared to an adjusted loss of $0.03 per share in the third quarter of 2019. That's a pretty notable improvement. Equally notable, however, was that analysts had been projecting adjusted earnings of $0.07, so MoneyGram handily beat Wall Street expectations -- something investors tend to get excited about.
Image source: Getty Images.
One of the big highlights from the earnings release, meanwhile, was the rapid growth MoneyGram has seen in online transactions. The company's direct-to-consumer online offering saw transaction volume increase 111% year over year, with revenue growth up 114%. Management noted strong customer retention as well. That suggests that COVID-19 has provided a short-term boost to this business that might actually stick around. That update is probably just as exciting as the earnings beat.
Now what
Today's huge stock price gain has likely priced in a lot of good news at MoneyGram in a very short period of time. In fact, with the stock now up over 175% for the year, long-term investors should probably tread cautiously here.
