Chime Financial (CHYM 0.25%) hasn't impressed many investors since its initial public offering (IPO) this June. The provider of mobile banking services went public at $27 a share, but it now trades at around $17.
Chime's business is still growing, but a sequential slowdown in its latest quarter spooked the bulls. Does that pullback represent a good buying opportunity for investors who want to hold its stock for at least five years? Let's review its business model and near-term challenges to decide.
Image source: Getty Images.
How does Chime differ from traditional banks?
Chime provides no-fee checking and savings accounts with overdraft protection, early-pay features (earlier access to direct deposits), and other financial services. It also issues a Visa debit card with no-fee access to over 50,000 ATMs and an entry-level Visa credit card.
The company mainly targets lower-income users who don't have enough cash to open higher-value, no-fee accounts at traditional banks. Its early-pay tools are also useful for people who live paycheck to paycheck, while its credit cards help them gradually build up their credit scores.
NASDAQ: CHYM
Key Data Points
But Chime isn't a bank. Its fintech platform streamlines the online banking services from two federally-insured banks: The Bancorp and Stride Bank. These two banks hold and manage all of Chime's accounts.
The company generates most of its revenue by taking a cut of the swipe fees that Visa charges businesses whenever its debit and credit cards are used. A smaller percentage comes from the incentives paid by its banking partners for drawing in more customers.
Did investors overreact to Chime's slowdown?
Chime's growth can be gauged by its number of active members, the purchase volumes on its cards, and its average revenue per active member (ARPAM). Those metrics rose in 2023 and 2024, but its purchase volume and ARPAM dipped sequentially in the second quarter of 2025:
|
Metric |
2023 |
2024 |
Q1 2025 |
Q2 2025 |
|---|---|---|---|---|
|
Active members |
6.6 million |
8 million |
8.6 million |
8.7 million |
|
Member growth (YOY) |
25% |
21% |
23% |
23% |
|
Purchase volume |
$92.4 billion |
$115.2 billion |
$34.5 billion |
$32.4 billion |
|
Volume growth (YOY) |
29% |
25% |
18% |
18% |
|
ARPAM |
$212 |
$245 |
$251 |
$245 |
|
ARPAM growth (YOY) |
1% |
16% |
9% |
12% |
|
Revenue |
$1.28 billion |
$1.67 billion |
$519 million |
$528 million |
|
Revenue growth (YOY) |
27% |
31% |
32% |
37% |
Data source: Chime Financial. YOY = Year over year.
Management attributed that sequential slowdown to its seasonal headwinds, since tax refunds often drive more spending in the first quarter of each year. That was certainly true last year: In the second quarter of 2024, its total purchase volume and ARPAM declined 3% and 6%, respectively, on a sequential basis. Therefore, that slowdown shouldn't be considered a bright red flag yet.
However, the margin under adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- which finally broke even in 2024 and expanded to 5% in the first quarter of 2025 -- still dipped sequentially to 3% in the second quarter as it ramped up its marketing campaigns and expanded its ecosystem with lower-margin features.
That mix of slower growth and higher expenses likely disappointed its growth-focused investors, but the near-term outlook indicates its core business is still firing on all cylinders. For the full year, it expects its revenue to rise from 28% to 29% as its adjusted EBITDA margin expands to 4%.
Where will Chime's stock be in five years?
From 2024 to 2027, analysts expect Chime's revenue to show a compound annual growth rate (CAGR) of 23% to $3.1 billion. They expect its adjusted EBITDA to turn positive in 2025 with a CAGR of 125% to $455 million in 2027. With an enterprise value of $5.4 billion, it still looks undervalued at 2 times next year's sales and 20 times its adjusted EBITDA.
Chime still faces plenty of competition from other fintech apps, like PayPal and Block's Cash App, but there could be plenty of room for these platforms to expand without trampling one another. All of them should continue to pull lower-income customers away from bigger banks, especially if the broader economy weakens.
Assuming Chime matches analysts' estimates through 2027, has a CAGR of 20% through 2031 for revenue, and trades at a more generous 5 times forward sales, its stock could surge nearly sixfold within the next five years and boost its enterprise value to $32.2 billion. So if you believe it can hit those targets as it widens its moat against its competitors, then it's a good idea to accumulate more shares of this fintech as it stagnates below its IPO price.
