Shares of Voyager Digital (VYGV.F 3.11%) have taken investors on a roller coaster ride over the past year plus. The stock was trading at under $1 as recently as late 2020, before surging to an all-time high of $30 last April before descending back to $8.60 during the latest crypto sell-off.
The stock is down nearly 75% from all-time highs, despite the prices of Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and other top cryptos rebounding. So is Voyager Digital a buy? My short answer is yes, but the digital-currency brokerage has some work to do.
What is Voyager Digital?
Voyager allows users to buy, sell, and hold a wide variety of cryptocurrencies from various marketplaces in one account.
One attractive aspect of this brokerage is the absence of trading fees -- although much like the criticism levied at other "free" brokerages, users are often paying for a spread between the listed price and the price at which the trade executes.
Even more attractive is the interest that Voyager pays out to users on their crypto holdings. It offers monthly interest on over 35 crypto assets via its Voyager Earn program , and many of these rates are incredibly attractive in a low-yield world where traditional income stocks like consumer staples and utilities pay 2% to 4% dividend yields.
The brokerage pays out a whopping 12% annual interest on Polkadot (CRYPTO: DOT) holdings and 9% on USDC (CRYPTO: USDC) stablecoin. Widely held cryptos like Bitcoin and Ethereum earn 4.75% and 4.25%, respectively.
Voyager is doing a great job of continuing to add new assets to its Earn program. For example, Solana (CRYPTO: SOL) was just added and now accrues 3% interest annually. Voyager's native VGX token pays out 7% and gives holders other benefits in its loyalty program.
White-hot growth and attractive valuation
Preliminary second-quarter 2022 results show that revenue doubled from $81 million in the previous quarter to $165 million. On an annual basis, revenue for 2021 is estimated to be $415 million, compared to just over $6 million for 2020. Obviously, these numbers benefit from cryptocurrency's surge in 2021, but Voyager is clearly growing at an incredible rate.
Furthermore, these revenue numbers show that it trades at a compelling valuation. With a market cap of just $1.4 billion, Voyager is trading at just over three times sales, which seems very inexpensive for a stock with this growth rate.
For example, I am also bullish on Coinbase Global (NASDAQ: COIN), which trades at seven times sales. While not an apples-to-apples comparison, Voyager also looks undervalued compared to another online brokerage business that is dabbling in crypto, Robinhood Markets (NASDAQ: HOOD), which also trades at nearly seven times sales.
Voyager has a number of other interesting irons in the fire. For example, it has stated it will soon launch its first debit card and has started taking sign-ups for it. The co-branded card with Mastercard (NYSE: MC) will allow users to make purchases anywhere they can use a normal Mastercard, and they will receive rewards via USDC.
Voyager recently partnered with the National Basketball Association's Dallas Mavericks and their high-profile owner, Mark Cuban -- a crypto proponent -- to become the team's first (and exclusive) cryptocurrency partner for the next five years. It remains to be seen what this partnership will lead to. At the very least, it is an interesting development and raises awareness of the Voyager brand at a time when many cryptocurrency firms are seeking to increase their public profile.
The work ahead
While these are all positive developments for Voyager, the company also has some work in front of it. It has yet to launch a desktop version of its mobile trading app, and I view having a desktop platform as crucial for attracting larger investors with more assets under management.
It has to execute on the rollout of its debit card program. And although I give credit to Voyager for having a wide array of coins available for trading, it has to work on allowing transfers of these coins to external wallets, as some users will inevitably want to use their holdings to participate in the ecosystems for coins like Solana or Avalanche. For example, right now a customer wouldn't be able to transfer their Solana outside of Voyager into a Solana wallet and use it to buy an NFT since external transfers for Solana are not supported, or transfer their Avalanche into a decentralized finance (DeFi) exchange like Trader Joe.
Is Voyager a Buy?
I view Voyager as a buy based on its surging growth and relative undervaluation when compared to companies like Coinbase and Robinhood. The company has a lot of interesting developments like its debit card and Mavericks partnership.
The interest rates in its Voyager Earn program should make it a compelling marketplace that will attract investor assets despite the current challenges, and I think Voyager can be a great long-term investment as it tackles those.