European Expansion And Payments Integration Will Strengthen Future Prospects

Key Takeaways

• Expanding into new European markets and strengthening Brazil's client base is expected to drive significant revenue growth.
  
• Focusing on upselling Payment solutions and integrating Payments and Software aims to improve revenue and net margins.
  
• Execution risk in international expansion and regulatory hurdles may delay revenue growth, while competition in payments necessitates adaptation impacting net margins.

Catalysts

A technology company, offers solutions and mobile platforms for digital payments, customer engagement, microfinance, and digital services in Brazil and internationally.

• Bemobi is expanding its geographic reach into new European markets, such as Switzerland and Slovenia, and strengthening its client base in Brazil by securing major enterprise clients. This expansion and client acquisition strategy are likely to drive significant revenue growth.
  
• The company is focusing on upselling and cross-selling its Payment solutions to existing SaaS clients, which demonstrates a strategy aimed at increasing net margins and earnings through deepening existing customer relationships.
  
• Innovations in the Microfinance market, such as credit scoring transactions using alternative data, are showing accelerated growth with higher ticket sizes. This shift suggests potential increases in revenue despite decreased transaction volumes.
  
• The integration of Payments and Software, with over half of Bemobi's revenue coming from this segment, could be a significant growth driver. This strategic alignment is expected to boost revenue growth and improve net margins in the coming years.
  
• The company's strong cash position and strategic use of funds for M&A and share buybacks indicate a potential to improve earnings per share (EPS) while simultaneously positioning itself for accelerated growth through acquisitions.

Bemobi Mobile Tech Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bemobi Mobile Tech's revenue will decrease by -18.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.2% today to 23.4% in 3 years time.
• Analysts expect earnings to reach R$185.6 million (and earnings per share of R$1.79) by about January 2028, up from R$119.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.1x on those 2028 earnings, up from 9.6x today. This future PE is lower than the current PE for the BR Entertainment industry at 19.3x.
• Analysts expect the number of shares outstanding to grow by 6.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 19.27%, as per the Simply Wall St company report.

Bemobi Mobile Tech Future Earnings Per Share Growth

Risks

• The company is experiencing setbacks in its Microfinance sector with a decline in the number of transactions, which could affect revenue growth if the new credit scoring area does not scale as expected.
  
• There is potential execution risk in Bemobi's international expansion, as they are currently cautious and focused more on Brazil due to market readiness and potential regional challenges, which could affect their anticipated revenue from international markets.
  
• The anticipated impact of new clients and contracts may take several quarters to materialize, indicating a delayed improvement in revenue and profitability.
  
• Bemobi operates in a highly competitive payments landscape where disruptions, such as new payments methods like PIX, could require significant adaptation and investment, impacting net margins if not executed effectively.
  
• Regulatory approvals for new acquisitions, such as the acquisition of a payments group, add uncertainty and may delay strategic initiatives, which could impact anticipated future revenue and market expansion plans.

Valuation

• The analysts have a consensus price target of R$20.25 for Bemobi Mobile Tech based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of R$25.0, and the most bearish reporting a price target of just R$16.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$793.2 million, earnings will come to R$185.6 million, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 19.3%.
  
• Given the current share price of R$13.3, the analyst's price target of R$20.25 is 34.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.