What happened
Shares e-commerce technology company Riskified (RSKD -0.20%) jumped on Monday morning after one prominent analyst shared some more upbeat commentary on the current state of the business. As of 11 a.m. ET, Riskified stock was up 8%, but it had been up 11% earlier in the session.
So what
Goldman Sachs analyst Will Nance is sounding more upbeat about Riskified's prospects in 2023. According to The Fly, Nance now has a neutral rating on Riskified stock compared to his previous sell rating. However, his commentary sounds far more bullish than his price target of $5 per share would have you believe.
Through the first three quarters of 2022, Riskified's revenue is only up 14% from the same period of 2021. That's a sharp dropoff from its 35% year-over-year revenue growth in 2021. However, according to today's commentary from Nance, this might be the low point in Riskified's growth, with bigger gains coming in 2023.
Moreover, Nance believes Riskified's profitability is also poised to improve this year. And this commentary was enough to excite the market today about Riskified's stock.
Now what
I'm moderately surprised that the market is reacting so positively to Nance's commentary, considering he's not saying much more than what Riskified's management has already said.
Riskified partners with e-commerce companies to reduce fraud and increase transactions. And through winning new customers and upselling to existing customers, it recorded 20% year-over-year growth in the third quarter of 2022 -- better than its growth in the first half of the year. And it noted an acceleration in growth late in the quarter, which bodes well for upcoming fourth-quarter results.
Moreover, Riskified's management has been actively controlling costs to improve profitability, so again, no real surprise here with Nance's stance.
Riskified still needs to definitively prove to its customers and the market that its product is effective -- it's been fair to question it over the past year or so. However, the company is in strong financial position to endure the current challenges and improve. Its Q3 free cash flow was only -$4 million. It also has $484 million in cash and deposits and doesn't have any long-term debt.
Therefore, Riskified stock could be worth taking a look at for 2023, especially with revenue growth possibly accelerating and profits hopefully improving.
