Acquisitions And NASDAQ Listing Will Unlock New Markets

Key Takeaways

• Strategic acquisitions, market expansions, and partnerships are poised to drive significant growth in revenue and geographical presence.
  
• Listing on NASDAQ and diversified revenue streams could enhance market visibility, capitalization, and institutional investment access.
  
• Reliance on regulatory approvals and risky strategies in a volatile market could hinder revenue growth and affect earnings consistency and market valuation.

Catalysts

A technology company, develops and lists exchange traded products in Canada, Bermuda, and the Cayman Islands.

• DeFi Technologies has seen strategic and accretive acquisitions, such as the majority acquisition of Neuronomix, and expanded geographical presence, which are expected to drive future balance sheet growth and revenue increases.
  
• The company's expansion into high-growth markets, including Asia, Middle East, and Africa, and strategic partnerships like the MOE with the Nairobi Stock Exchange and new products in Singapore, are expected to enhance revenue from new exchange-traded products.
  
• The application to list its shares on NASDAQ could significantly improve visibility, access to institutional and retail investors, and potentially increase the company's market capitalization and earnings.
  
• The diversified revenue model of Valour with a significant increase in AUM growth by 132% and new product launches is expected to drive growth in management fees and revenue from its ETPs.
  
• DeFi Alpha's strategic growth through identifying low-risk arbitrage opportunities and model-driven strategies in the crypto space are expected to significantly contribute to revenue growth and improve net margins.

DeFi Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DeFi Technologies's revenue will grow by 105.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -70.7% today to 79.1% in 3 years time.
• Analysts expect earnings to reach CA$375.9 million (and earnings per share of CA$0.98) by about April 2028, up from CA$-39.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, up from -26.8x today. This future PE is lower than the current PE for the CA Capital Markets industry at 10.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.67%, as per the Simply Wall St company report.

DeFi Technologies Future Earnings Per Share Growth

Risks

• The company operates in a highly volatile digital assets market, and regulatory changes or unfavorable economic conditions could significantly impact their revenue and earnings.
  
• DeFi Technologies is reliant on gaining regulatory approvals in new geographic markets, which increases the uncertainty surrounding future revenue expansion and profitability.
  
• The anticipated growth heavily depends on the successful execution of multiple new product launches and geographic expansions, which introduces execution risk affecting future earnings.
  
• A large portion of the projected revenue growth is tied to DeFi Alpha's arbitrage strategies and large deals, which involve high recurrence risks and might not materialize as expected, affecting revenue consistency.
  
• The SEC's decision on listing on NASDAQ and other regulatory hurdles could pose significant delays and impact the company's ability to attract new investments, influencing capital structure and market valuation.

Valuation

• The analysts have a consensus price target of CA$6.083 for DeFi Technologies 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 CA$9.0, and the most bearish reporting a price target of just CA$4.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$475.3 million, earnings will come to CA$375.9 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 6.7%.
• Given the current share price of CA$3.2, the analyst price target of CA$6.08 is 47.4% 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.