Reconsider Mogo? –  Low Stock, Strategic Buybacks, and the WonderFi Connection

TDR Three Key Takeaways

1. Strategic Stock Buybacks: Is it time to reconsider Mogo? Mogo has been actively repurchasing its shares, buying over 1 million shares in the past two years. This indicates the company’s confidence in its own value, especially considering its significant stake in WonderFi, which adds considerable value to Mogo’s stock.
2. Positive Financial Performance: Mogo shows a strong gross profit trend and consistent revenue growth over the past three years, with high gross profit margins. This demonstrates the company’s solid financial health and potential for continued growth.
3. Fintech Industry Growth: The fintech sector, where Mogo operates, is experiencing rapid growth, significantly outpacing the overall banking industry. This trend suggests a favorable market environment for Mogo’s continued expansion and success.

Mogo, a Canadian digital finance firm, offers user-friendly solutions for wealth building and financial freedom. Its portfolio includes the MogoTrade commission-free stock trading app, Moka – an automated investment platform, digital loans, and mortgages. Additionally, through its subsidiary Carta Worldwide, Mogo provides a digital payment platform for fintech firms in Europe and Canada. Notably, Mogo’s stock, which peaked in March 2021, has since declined by 94%. This prompts the question: is Mogo now worth reconsidering?

Key points from my initial review:

1. Stock Buybacks: In 2023, Mogo repurchased 474,353 shares, adding to the 600,000 acquired in 2022. This totals 1,074,353 shares, representing 4.4% of its holdings after a 3:1 share consolidation in August 2023.
2. Greg Feller, President & CFO, plans ongoing buybacks. He believes the current share prices don’t fully reflect Mogo’s value, including its core business and 14% stake in WonderFi. Notably, with a $47M USD market cap, Mogo’s stake in WonderFi is worth $23.26M USD. Investors effectively get 50 cents of WonderFi value for every dollar invested in Mogo. For context, WonderFi operates several crypto platforms and offers a comprehensive range of services, including SmartPay for digital asset payments.
3. Gross Profit Trend: Over the past 12 months, Mogo has seen a positive gross profit trend of 87.5%, evaluated over the last eight quarters.
4. Financial Integrity: Our analysis suggests minimal risk of financial misconduct, as the cash flows align with the revenue and overall income statement.
5. Revenue Growth: Over the past three years, Mogo has maintained a compounded annual revenue growth of 28.4%, with a substantial gross profit margin of 61.2%.

Regarding the industry, in 2022, the banking industry experienced robust growth, generating over $6.5 trillion in revenues. This increase was characterized by a rise in both volume and revenue margins year-over-year. The fintech market dynamics within this context suggest a significant potential for further expansion in both public and private sectors. Fintechs accounted for about 5 percent, or approximately $150 billion to $205 billion, of the global banking sector’s net revenue in 2022, according to analysis from McKinsey. This share is projected to rise to over $400 billion by 2028, indicating an annual growth rate of 15 percent for fintech revenue between 2022 and 2028. This rate is notably three times the overall banking industry’s growth rate of about 6 percent.

After reviewing these points, I believe it’s an opportune time to reconsider Mogo’s potential. We will dig deeper at TDR and consider launching formal detailed research.