A lot of new-aged fintech stocks have been absolutely decimated in the recent market sell-off. But for those with a long-term perspective, the current environment is ripe with opportunities.
One intriguing name in the fintech space is digital card issuance pioneer Marqeta (MQ -1.41%). After hitting the public markets at $27 per share in June 2021, then reaching a high of $37.90, the stock has fallen with the rest of the market to a price of just $9.33 today.
That's quite a lot of price volatility, but given Marqeta's excellent financial results that have repeatedly beat expectations, its solid competitive position, and ample growth opportunities, it's a great stock to buy at these prices and hold for the long-term. With $100, you can buy 10 shares of this innovative company today.
A formidable cast of customers
Marqeta operates a technology platform that allows credit card issuers to tweak a card's characteristics to highly specific needs safely and securely. that platform is currently gaining traction with a wide variety of customers. Marqeta's largest customer is Block (SQ -0.06%), which uses Marqeta for its Cash App digital cards. Instacart uses Marqeta to load specific order amounts onto delivery driver's cards. Major banks from Goldman Sachs to Citibank are using Marqeta's platform to digitize and tokenize their corporate cards. Fintech cost management company Divvy uses Marqeta to link physical and digital cards with highly tailored cost controls. Even cryptocurrency companies like Coinbase use Marqeta to allow customers to seamlessly pay for goods and services funded directly from their crypto accounts.
With this diverse set of very high-profile financial and fintech leaders as clients, Marqeta does appear to have some "secret sauce."
Big-time growth numbers
This customer buy-in is translating into solid revenue growth for the young company. Revenue grew 78% last year to over $500 million, while gross margin expanded, with gross profits nearly doubling in the last year. Meanwhile, management projects 48%-50% growth this quarter on top of very difficult comparisons.
Importantly, Marqeta appears asset-light and scalable. The vast majority of its operating cost increase came in the form of compensation for talent last year, as Marqeta is still investing aggressively to capture its big opportunities. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was actually positive last quarter, although amounted to a $13 million loss for the full-year.
Still, that's around breakeven in terms of cash burn. So, Marqeta is growing very fast without having to burn much cash; meanwhile, the company is flush with $1.7 billion in cash and securities leftover from its IPO, and it has no debt. That's certainly a good position to be in in a rising interest rate environment.
Can the growth continue?
Despite its impressive growth rate over the past two years, Marqeta CEO Jason Gardner reminded investors on the fourth-quarter conference call with analysts that Marqeta's platform still processed less than 1% of all card volume in the U.S., and obviously far less than that globally.
Meanwhile, Marqeta is rapidly expanding geographically to capture the global opportunity. Last quarter, the company established certification in Thailand, the Philippines, and Singapore -- three high-growth markets where digital payments are under 50% penetrated, and which are growing and urbanizing quickly.
A reasonable value
With an impressive competitive lead in modern card issuance, large growth opportunities, and a rock-solid solid balance sheet, Marqeta now seems very reasonably valued at less than 10 times trailing sales, and around 7.2 times this year's revenue estimates. However, if you take out the extra $1.7 billion in cash from the company's roughly $5 billion market cap, it only trades around 4.8 times this year's revenue estimates.
While valuations are under a microscope today amid rising interest rates, that seems like a reasonable price to pay for a company with this kind of innovation and growth opportunity. While the short term is highly uncertain, Marqeta is a stock you can confidently buy today and hold for the next decade.