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Why MoneyGram International Stock Surged Today

By Jon Quast - May 7, 2021 at 3:24PM

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Its direct-to-consumer business is skyrocketing, and that's good news, considering its getting new competitors in stores.

What happened

Shares of cross-border payment company MoneyGram International (MGI -0.57%) surged on Friday after reporting financial results for the first quarter of 2021. The stock actually started the morning flat before steadily climbing and peaking around 1 p.m. EDT. It's pulled back some, but as of 2:40 p.m. EDT, MoneyGram stock was still up 21%.

So what

MoneyGram has agents in brick-and-mortar locations waiting to help customers with their cross-border payments. However, it also deals with consumers directly through its MoneyGram Online (MGO) services. Revenue in Q1 was only up 3% year over year when you account for currency fluctuations. However, MGO revenue was up 119%, reaching record highs for customers and transactions.

A businessman draws an exponential growth curve on a line graph.

Image source: Getty Images.

Growth in MGO is probably contributing to the market's enthusiasm for MoneyGram stock today. However, shareholders are likely also relieved to hear that its issue with the Department of Justice is nearing resolution. In short, MoneyGram has been certified as compliant with money-laundering regulations, and the matter is on the path toward being dismissed within the next seven weeks.

Now what

For the upcoming second quarter, MoneyGram management expects to generate revenue of $315 million to $325 million -- a modest sequential improvement. However, Walmart has decided to allow competition (Western Union) with MoneyGram in its stores, and this is something management mentioned as causing some uncertainty going forward. It underscores the need for this financial stock to continue growing its direct-to-consumer MGO business in case this increasing competition starts stealing some of its brick-and-mortar business.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

MoneyGram International, Inc. Stock Quote
MoneyGram International, Inc.
$10.37 (-0.57%) $0.06
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$127.61 (0.81%) $1.03
The Western Union Company Stock Quote
The Western Union Company
$16.19 (-1.10%) $0.18

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