Launching 23 First-Mover Products And Expanding Into New Markets Will Strengthen Market Position

Key Takeaways

• International expansion and strategic product launches plan to boost market share and increase revenue through innovative offerings in new regions.
  
• Potential U.S. exchange uplisting, strategic partnerships, and trading technologies aim to improve liquidity, attract investors, and enhance net margins.
  
• Heavy reliance on volatile digital asset prices and complex regulatory navigation could destabilize revenue and impact cash flow metrics.

Catalysts

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

• DeFi Technologies plans to expand internationally, targeting new markets in North Africa, Asia, and the Middle East, which can significantly increase their assets under management (AUM) and lead to higher revenue and earnings.
  
• The company is set to launch 23 new products by the end of the year, many of which are first-mover advantage products, potentially increasing their market share and revenue through innovative offerings.
  
• The company has plans for a potential uplisting to a major U.S. exchange, which could enhance liquidity, attract more investors, and improve valuation metrics, potentially increasing earnings per share (EPS).
  
• DeFi Alpha, a specialized arbitrage trading desk, has shown robust growth and is projected to continue generating significant revenue without reporting losses, which could positively impact net income.
  
• Strategic partnerships and proprietary trading technologies, such as the joint venture with Zero Computing to enhance trading efficiencies, can lead to increased net margins through technological advantages and cost savings.

DeFi Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DeFi Technologies's revenue will grow by 7.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 60.3% today to 68.2% in 3 years time.
• Analysts expect earnings to reach CA$136.9 million (and earnings per share of CA$0.34) by about January 2028, up from CA$97.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as CA$115.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.7x on those 2028 earnings, up from 15.1x today. This future PE is greater than the current PE for the CA Capital Markets industry at 12.2x.
• Analysts expect the number of shares outstanding to grow by 7.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.46%, as per the Simply Wall St company report.

DeFi Technologies Future Earnings Per Share Growth

Risks

• The company's future revenue projections are heavily reliant on current asset prices and do not account for additional gains, which could lead to volatility in financial performance if digital asset prices do not rise as expected.
  
• A large portion of the company's liquidity is tied up in cryptocurrencies, which are not considered cash by regulators, potentially impacting the cash flow and perceived profitability metrics.
  
• The company's strategy includes significant international expansion and launching new financial products, which involves execution risk and could lead to increased operational costs or reduced net margins if expansions aren't successful.
  
• Reliance on regulatory changes, such as potential uplisting to a major U.S. exchange, adds uncertainty to earnings forecasts and market confidence, which may take longer than anticipated or face unforeseen obstacles.
  
• The growth projections assume successful navigation of complex regulatory landscapes across multiple jurisdictions, which carry risks of delays or additional compliance costs that could negatively impact net margins or earnings.

Valuation

• The analysts have a consensus price target of CA$5.83 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$8.0, and the most bearish reporting a price target of just CA$4.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$200.7 million, earnings will come to CA$136.9 million, and it would be trading on a PE ratio of 20.7x, assuming you use a discount rate of 6.5%.
• Given the current share price of CA$4.52, the analyst's price target of CA$5.83 is 22.5% 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.