On Monday, Goldman Sachs (NYSE:GS) reiterated its Neutral rating on Marqeta Inc. (NASDAQ: NASDAQ:MQ), maintaining a price target of $6.00 for the payment solutions company. The firm's commentary highlighted Marqeta's positive growth trajectory and its potential for international expansion. Additionally, the strong booking trends were noted as a positive indicator for the company's future performance.
Marqeta's management team expressed enthusiasm about the diverse aspects of the business beyond their relationship with Block, particularly the credit opportunities available in both consumer and commercial markets. The company believes it has a unique position in the market to offer innovative solutions to its partners, including issuing for Flex (NASDAQ:FLEX) Credential.
The company's strategy for capital allocation includes prioritizing share buybacks. However, management is also considering smaller-scale mergers and acquisitions (M&A) as a means to enhance Marqeta's capabilities and expand its offerings.
Marqeta's focus on international markets and the development of new financial products positions it to potentially capitalize on the growing demand for innovative payment solutions. The company's approach to strategic investments and acquisitions aims to further solidify its standing in the financial technology sector.
The reiterated price target of $6.00 by Goldman Sachs reflects the firm's assessment of Marqeta's current valuation and its prospects within the evolving payments industry. As the company continues to execute its growth strategy, investors and market watchers will be monitoring its progress in the coming months.
In other recent news, Marqeta, a modern card issuing platform, reported mixed results for its Q2 earnings. Despite a 46% decrease in net revenue and a 6% contraction in gross profit, the company's total processing volume (TPV) increased by 32% year over year, reaching $71 billion. The decrease in revenue is largely attributed to changes from the Cash App contract renewal. In addition, Marqeta reported a negative adjusted EBITDA of $2 million.
Recent developments include strategic partnerships with Varo Bank and Zoho, along with a certification by Visa (NYSE:V) for flexible credential support. These developments position Marqeta for growth in financial services and expense management solutions. The company projects net revenue growth between 16% and 18% for Q3 and Q4, with gross profit growth expected in the mid-20s percentage range.
Despite the contraction in revenue and gross profit, Marqeta remains optimistic about achieving profitability and sustainable growth in the near future.
The company anticipates becoming adjusted EBITDA positive in the second half of the year and aims for non-GAAP profitability in 2024 and GAAP profitability by the end of 2026.
InvestingPro Insights
Goldman Sachs' neutral stance on Marqeta Inc. (NASDAQ: MQ) comes at a time when the company's stock performance has been notably turbulent. With a recent price of $4.91, Marqeta's market capitalization stands at $2.52 billion, reflecting the challenges it faces in a competitive payment solutions landscape. An InvestingPro Tip points out that the stock has taken a significant hit over the last week, aligning with the 7.88% one-week total price return. This volatility may have caught the eye of value-seeking investors, as another InvestingPro Tip highlights management's aggressive share buybacks, a move that can signal confidence in the company's intrinsic value.
While analysts forecast a sales decline in the current year, Marqeta's gross profit margin remains strong at 67.79% over the last twelve months as of Q2 2024. However, the company's profitability is under scrutiny, with a P/E ratio of -205.42 and adjusted P/E ratio of -90.45 for the same period, suggesting that Marqeta is currently not profitable. This is corroborated by an InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year. Despite these challenges, Marqeta's liquid assets surpass its short-term obligations, which could provide some financial flexibility in navigating the market.
For readers interested in a deeper dive into Marqeta's financial health and future prospects, there are additional InvestingPro Tips available, offering insights that could be crucial for making informed investment decisions.
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