Shares of expense-reports company Expensify (EXFY -0.81%) surged on Monday following a strong vote of confidence from a prominent analyst. As of 3 p.m. ET today, Expensify stock was up 11%, which is notable considering the market had given up early gains and was trending downward as of this writing.
Expensify's mission is to make handling expense reports easier. Bank of America analyst Koji Ikeda came out today saying he believes the company could be a "category disruptor" in the space. And because of this potential, Ikeda raise his price target for the stock from $20 to $25, according to The Fly.
In my opinion, a raised price target is particularly notable right now. Analysts tend to raise price targets when the stock is going up, not down. But Expensify stock has fallen more than 50% year to date. By raising a price target at this time, Ikeda's upgrade is atypical, which communicates strong conviction. And this is why Expensify stock was up today.
To Ikeda's point, Expensify is putting up impressive numbers. The company went to a "freemium" model in October, allowing individuals to use some of its products at no charge. Less than six months later, at the end of the first quarter of 2022, it already had more than 9,000 free users. Management expects to generate revenue from these free users over time as they use Expensify's card and as they upgrade to paid accounts.
By being willing to think differently about user acquisition, Expensify has kept its sales-and-marketing expenses relatively low. It spent just $27.7 million for full-year 2021, or 19% of revenue, which is actually quite low for a small-cap stock like this trying to stand toe-to-toe with its much larger rivals. Time will tell if this is truly a category-disrupting approach.
Expensify's financial results for the second quarter of 2022 are expected in August.