BM Technologies, Inc.

BMTX Details

BM Technologies, Inc. (NYSE: BMTX) operates a digital banking platform and offers banking and disbursement services to clients and students in the US. It functions on the Banking-as-a-Service (BaaS) model, and its revenue-generating segments include interchange and card income, bank servicing fees, account fees, and university fees. BMTX currently has ~2.0 million accounts and offers disbursement services at 745 college and university campuses.

Latest News:

• Strategic Merger: On November 15, 2021, BMTX executed a merger agreement to merge with Seattle-based First Sound Bank for a total cash consideration of USD 23 million. The transaction is expected to be completed in H2FY22, subject to customary closing conditions, including the receipt of regulatory approvals. Upon completion, the combined company will be called BMTX Bank.

Q3FY21 Results:

• Improvement in Revenue: The company reported a 19.83% increase in its total operating revenues to USD 21.97 million in Q3FY21 (ended September 30, 2021) compared to USD 18.34 million in Q3FY20, primarily due to an increase in deposit servicing fees resulting from higher average serviced deposit balances.
• Surge in Net Income: Its net income increased to USD 8.79 million in Q3FY21 vs. USD 0.25 million in Q3FY20.
• Strong Balance Sheet: The company's cash and cash equivalents were USD 20.41 million as of September 30, 2021, and no outstanding debt.

Key Risks:

• Customer Concentration Risk: A banking-as-a-service partner accounted for ~39% of BMTX's accounts receivable (including unbilled receivables) on September 30, 2021. Such excessive dependence on a few clients could impact the company's long-term financial sustainability.
• Regulatory Risk: BMTX's banking partners are subject to stringent regulatory scrutiny, and as a financial service provider, the company is also required to adhere to any restrictions imposed by the authorities, which may be costly and ban some practices, such as interest rates charged on loans and interest rates paid on deposits.

Outlook:

• Revenue & EBITDA Estimates: In its Q3FY21 release, BMTX stated that it anticipates generating USD 92 million in sales during FY21. It also expects to clock in USD 26 million in EBITDA during the period.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BMTX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

BMTX's stock price has surged 65.78% in the past month and is currently leaning towards the higher end of its 52-week range of USD 7.68 to USD 18.35. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 85.96, indicating an overbought zone. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 10.55.

Considering the significant uptick in the stock price in a short period, other technical indicators, and the current valuation, we recommend a "Sell" rating on the stock at the current price of USD 13.66, up 24.64% as of November 15, 2021, at 11:37 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.