Surging Digital Asset AUM And Institutional Adoption Will Drive Powerful Long Term Upside

Catalysts

About DeFi Technologies

DeFi Technologies operates a diversified, profitable digital asset platform focused on regulated ETPs, institutional trading, and yield generation across the crypto ecosystem.

What are the underlying business or industry changes driving this perspective?

• Record and rising assets under management near USD 1 billion, combined with consistent net inflows into Valour ETPs, position the company to scale recurring management and staking revenues materially as digital asset adoption deepens in Europe and beyond. This directly supports long term revenue and earnings growth.
• Strengthened balance sheet with approximately USD 165 million in cash and crypto plus a recent USD 100 million equity raise enables DeFi Technologies to fully redeploy AUM into higher yielding strategies, pursue selective M&A, and seed new products. This should expand monetization rates and support higher net margins.
• Acceleration of institutional participation in European digital assets and increasing inbound interest from new jurisdictions provide a larger addressable market for the firm’s 100 plus regulated products, UCITS funds and actively managed certificates. This supports sustained AUM growth and operating leverage in earnings.
• Growing contribution from Stillman Digital’s high margin institutional trading and liquidity services, underpinned by rising global tokenization and stablecoin activity, creates an additional scalable fee engine that can drive faster top line expansion and improved consolidated profitability.
• Embedded optionality from DeFi Alpha arbitrage strategies, data and scoring services, and strategic stakes in high growth ventures such as AMINA Bank and leading regional stablecoin platforms offers multiple pathways for incremental fee income and investment gains. This can enhance both revenue diversification and long term earnings power.

Assumptions

This narrative explores a more optimistic perspective on DeFi Technologies compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming DeFi Technologies's revenue will grow by 67.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.6% today to 91.5% in 3 years time.
• The bullish analysts expect earnings to reach $293.1 million (and earnings per share of $0.78) by about December 2028, up from $8.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $65.6 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.0x on those 2028 earnings, down from 48.8x today. This future PE is greater than the current PE for the CA Capital Markets industry at 8.8x.
• The bullish 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 7.24%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The core business remains highly sensitive to crypto market cycles and Bitcoin prices around USD 100,000, so a prolonged downturn or flat environment for digital assets, including weaker staking yields across protocols, could stall AUM growth and compress fee and staking income, reducing revenue and earnings over the long term.
• Management has already deferred USD 102 million of DeFi Alpha related revenues due to compressed arbitrage spreads, increased competition from digital asset treasury companies and narrower price movements. This highlights the risk that higher margin arbitrage and treasury strategies may structurally deliver less than expected, limiting long term upside in net margins and earnings.
• The strategy depends on deploying a very high proportion of AUM into yield generating strategies and continually upgrading market making infrastructure. Any sustained increase in counterparty, liquidity or operational risk constraints, for example tighter regulations or risk limits from partners, could force lower deployment or lower risk strategies, reducing monetization rates, revenue and operating income over time.
• Geographic and product expansion, including UCITS funds, actively managed certificates, hybridized instruments and new stablecoin and data businesses, requires regulatory approvals and long sales cycles with institutions. Delays, stricter rules or weaker than expected institutional adoption in Europe and other large markets could mean AUM, advisory fees and trading volumes scale much more slowly, pressuring long term revenue growth and operating leverage.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for DeFi Technologies is CA$9.0, which represents up to two standard deviations above the consensus price target of CA$5.6. This valuation is based on what can be assumed as the expectations of DeFi Technologies's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• 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$3.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $320.3 million, earnings will come to $293.1 million, and it would be trading on a PE ratio of 13.0x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of CA$1.5, the analyst price target of CA$9.0 is 83.3% 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.