Stocks have gotten off to a lackluster start in 2022, with the S&P 500 down almost 12% at Friday's close. Growth stocks have gotten beaten up, and companies that have yet to turn a profit have been even worse off.
One such company is Marqeta (MQ -2.72%), down 70% from its 52-week high. It's still in the early stages of growth and hasn't posted a profitable quarter since going public. As a result, its stock has gotten punished amid volatile market conditions.
Even though it's down big, I'm still not selling Marqeta. Marqeta's customizable payment cards are helping banks and other companies in the e-commerce space prevent fraud and unlock flexibility in innovative ways. It's done a stellar job -- and its recent earnings release proves it.
Cutting down on fraud as digital payments explode in popularity
As the pandemic has made us more reliant on digital payments, attempts to steal payment data have risen too. According to a report by the FBI, phishing scams were up 110% in 2020. Meanwhile, 63% of people surveyed by Marqeta expressed concerns about their bank's ability to detect fraudulent activity. This is the kind of problem Marqeta excels at solving.
Take Marqeta's partnership with DoorDash. DoorDash offers on-demand delivery from a variety of restaurants, and it faced a challenge figuring out how to pay them while minimizing the risk of fraud. Creating a new payments card could be slow, and giving delivery drivers a card with a set balance left DoorDash vulnerable to unauthorized spending. Marqeta's platform made it easy to quickly for DoorDash to give its drivers physical cards that use just-in-time funding, which lets the company authorize every transaction in real time.
This relationship benefits DoorDash in another way -- additional insights into customers' behaviors. Because Marqeta gives DoorDash real-time insights, the company can track everything from end to end, ensuring the transaction goes as smoothly as possible.
Image source: Getty Images.
Helping legacy companies shift seamlessly to digital wallets
Marqeta recently announced a new partnership with Citigroup where Citi's Commercial Cards will use Marqeta's tokenization-as-a-service (TaaS). Marqeta launched this service in 2016 through Block's Cash App, and JPMorgan Chase also adopted this service recently. TaaS lets bank cardholders quickly transform corporate plastic cards and virtual cards into mobile wallets. According to data from Trading Platforms, digital or mobile wallet payments were the most used point-of-sale payment method in 2020. Marqeta found that 64% of customers were using a mobile wallet in 2020, up from 28% in 2019.
TaaS provides issuers with a way to offer contactless payment options directly into a mobile wallet in real time, letting cardholders use cards through a mobile wallet without waiting for a physical card. It fills a gap between legacy card issuers and Marqeta's modernized card platform and is another way Marqeta modernizes payments for the digital age.
Image source: Getty Images.
Total processed volume is up 50X over four years
Marqeta has become a trusted partner for many major corporations, which is evident from its most recent financial release. Total processed volume (TPV) was up 76% in the fourth quarter and up 85% for the year, ending the year at $111 billion. Since 2017, Marqeta's TPV has increased some 50-fold. This drove net revenue growth of 76% in the fourth quarter and full-year net revenue growth of 78%, with sales coming in at $517 million in 2021.
The fintech posted a net loss of $37 million in the fourth quarter and $164 million for the whole year. Much of this net loss is related to share-based compensation from its initial public offering (IPO) last year. While share-based compensation expenses remain high, they have been slowing down in recent quarters. In the second quarter last year, Marqeta's net loss peaked at $69 million. Since then, it has posted losses of $46 million and $37 million -- which continue to weigh it down.
Marqeta expects revenue growth of 48% to 50% on a gross profit margin of 43% to 44% in the first quarter. Given its partnerships with major companies, unique product offerings, and solid growth, Marqeta looks like a great buy at its current price -- which is why I'm not selling anytime soon.
