Expanding Geographic Reach And AI Integration Will Open New Markets

Key Takeaways

• Geographic expansion and local partnerships position Remitly to capture more share in the large remittance industry, supporting revenue growth.
  
• Improvements in AI-driven risk management and customer experience boost profitability by reducing costs and enhancing customer retention.
  
• Potential regulatory changes, currency fluctuations, and increased competition could impact Remitly's revenue, margins, and profitability in the highly competitive remittance industry.

Catalysts

Engages in the provision of digital financial services in the United States, Canada, and internationally.

• Remitly is expanding its geographic presence and integrating with local payment partners, enhancing its ability to capture more market share in the $2 trillion remittance industry. This expansion likely positively impacts revenue growth.
  
• The company's focus on customer experience improvements, including faster transaction times and reducing friction, leads to increased customer retention and higher transaction frequency, potentially boosting revenue and improving net margins.
  
• Remitly’s use of AI and machine learning for risk management and customer support reduces costs and transaction losses, which may improve net margins and contribute to profitability.
  
• The ongoing diversification of customer use cases, such as catering to micro-businesses and high-amount senders, expands the company’s total addressable market and creates new revenue streams, which can drive further revenue growth.
  
• The company expects sequential improvements in adjusted EBITDA throughout 2025, which demonstrates a focus on efficient growth strategies that enhance earnings and net margins.

Remitly Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Remitly Global's revenue will grow by 20.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -2.9% today to 6.2% in 3 years time.
• Analysts expect earnings to reach $137.8 million (and earnings per share of $0.62) by about May 2028, up from $-37.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $181.5 million in earnings, and the most bearish expecting $65.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 55.6x on those 2028 earnings, up from -115.4x today. This future PE is greater than the current PE for the US Diversified Financial industry at 14.1x.
• Analysts expect the number of shares outstanding to grow by 4.22% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.84%, as per the Simply Wall St company report.

Remitly Global Future Earnings Per Share Growth

Risks

• Remitly faces potential regulatory changes as a risk not accounted for in its future growth projections, which could impact revenue and profitability.
  
• The company's adjusted EBITDA margins might not expand significantly due to the need to invest in marketing and technology to compete and grow in the $2 trillion market, impacting earnings.
  
• Currency fluctuations are a potential risk, as foreign exchange movements, while not accounted for in preliminary forecasts, could affect revenue and profitability.
  
• There is uncertainty whether the current strong trends in transaction frequency and customer activity levels can be sustained, which could impact projected revenue growth and net margins.
  
• Increased competition in the remittance industry could lead to pricing pressures, potentially affecting gross margins and reducing overall profitability.

Valuation

• The analysts have a consensus price target of $27.291 for Remitly Global 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 $32.0, and the most bearish reporting a price target of just $23.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.2 billion, earnings will come to $137.8 million, and it would be trading on a PE ratio of 55.6x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $20.94, the analyst price target of $27.29 is 23.3% 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.