It’s been less than a month since Chime Financial went public, but Neobank is winning the win of analysts who are already writing about company prospects.
Chime is becoming a winner in the segment that caters to low-income consumers, KBW research analyst Sanjay Sakhrani wrote in a July 7 research note. He gave Chime a rating of “outperforming the market” and a target of $42.
Founded in 2012, Chime provides traditional financial services such as free checking and savings accounts to our consumers who earn up to $100,000 a year. Sakhrani believes that these daily Americans have poor service to traditional banks.
“Seldom digital platforms have a digital infrastructure, product market alignment and innovation speed to serve this population efficiently and advantageously, and we think Chime is one of them,” Sakhrani said.
Chime is one of Fintech’s most well-known figures and a multi-year IPO candidate, which was finally released on June 12. Rose 37% during debut. Chime has encountered some initial volatility since then, but the stock has managed to stay above it $27 IPO price. The stock was traded for over $31 Tuesday afternoon.
Wall Street analysts usually don’t issue research reports to companies until the 25-day quiet period of IPO ends. Chime was released 26 days ago.
Growth space
It is estimated that Chime covers less than 5% of its total addressable market, including $19,000 annual salary for 19,000 Americans. As of March 31 wealth Before Report.
Sakhrani believes that Chime “successfully leverages this sticky user base” to drive product adoption and monetization increase. This has brought new products to each active member or Arpam’s average revenue growth, Sakhrani wrote. (ARPAM is an indicator of the income generated by active members.)
“We believe that ARPAM expansion is the core revenue driver over the next 2-3 years and is the potential upside potential for near-term expectations, as we believe the company has taken a conservative approach to modeling four new product launches in the next 12 months,” Sakhrani said.
Chime is not a bank, nor does it have a bank charter. Instead, it’s with Bancorp Banks and multinational banks provide their services.
FinTech has launched several new products over the past few years, including Instant Loans, discount Users get a price of up to $500 at a fixed interest rate, and mypayThis enables eligible members to receive a portion of their salary before payday. Sakhrani said MyPay accounts for about 45% of Chime’s year-on-year revenue growth over the past two quarters. He said most of Chime’s future growth is expected to come from credit and loan products such as MyPay and Instant Loans. Sakhrani said Chime assumes the risk of losses associated with these products and assumes any default on unpaid balances to its banking partners. With Chime launching these new products, the loss rate usually soars and then drops. “The ability to manage this risk will be the key to the company’s profitability,” Sakhrani said.
Chime relies on exchanges, when consumers use debit or credit cards issued by Zhongsheng to drive most of their income, the merchant pays. Fintech reported revenues of approximately $1.7 billion in fiscal 2024, compared with revenues of $518.7 million in the three months ended March 31. Regulatory application. About 75% of Chime’s revenue is based on charges and is related to exchange, Sakhrani said.
Chime faces fierce competition from traditional financial institutions such as Ally and Capital One, as well as a variety of different Fintech platforms targeting the same users like Sofi, Sunstrucy and Cash App (owned by Block). Sakhrani believes that many of these platforms have larger financial resources or a larger user base that may give them a competitive advantage, adding that “high competition may pose risks to long-term sustainable growth.”
However, he remained optimistic about FinTech’s opportunity for competitors, adding: “Chime’s leading position in the space and a strong track record of its highly engaged client base puts them in a good position in our opinion.”
