On Monday, Goldman Sachs (NYSE:GS) initiated coverage on shares of Marqeta Inc. (NASDAQ:MQ), assigning a Neutral rating and setting a price target of $5.50. Marqeta, recognized as a leading provider in embedded finance, particularly for card-based programs, is noted for its substantial experience in managing complex card programs for major clients.
Goldman Sachs acknowledges Marqeta's pivotal role in the success of Block Inc.'s (formerly Square Inc (NYSE:SQ).) Cash App card. The firm is optimistic about Marqeta's potential growth, driven by the expansion of its commercial initiatives. These include early wage access programs and a partnership with Walmart (NYSE:WMT), which are expected to contribute to the company's performance in the medium term.
Despite the positive aspects, Goldman Sachs points out challenges in the consumer fintech space. The U.S. market is highly concentrated, with Block Inc. holding a significant market share, which could make Marqeta's growth reliant on its international market penetration and its ability to maintain its business relationship with Block. Additionally, as a white-label service provider, Marqeta faces limitations in pricing power.
The valuation of Marqeta stands at 33 times its estimated 2025 Adjusted EBITDA, with stock-based compensation (SBC) being a substantial factor. This valuation, coupled with the mixed growth outlook in the consumer fintech sector, has led to the Neutral stance by Goldman Sachs. The price target reflects a measured perspective on the company's future financial performance in light of these considerations.
In other recent news, Marqeta Inc. delivered a strong financial performance for the first quarter of 2024, with key financial metrics including net revenue, gross profit, and adjusted EBITDA exceeding market expectations. The company's total processing volume (TPV) saw a significant year-over-year increase of 33%, reaching $67 billion. Marqeta also announced a share repurchase program of up to $200 million.
Following the release of these earnings, Citi reaffirmed its Buy rating on Marqeta shares, maintaining a steady price target of $8.00. The financial firm's assessment of Marqeta's financial strategies, including share repurchases and stock-based compensation plans, influenced this decision.
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