Visa Direct Integration And European Partnerships Will Unlock New Markets

Key Takeaways

• Strong international growth and European partnerships will drive revenue impact, with strategic expansions leveraging Visa's network boosting transaction volumes.
  
• AI, blockchain, and strategic partnerships may enhance operational efficiencies, reduce costs, and promote earnings growth through improved margins and reduced compliance risks.
  
• Revenue declines, integration delays, and negative earnings highlight operational inefficiencies, potentially affecting Ryvyl's investor confidence and financial flexibility for growth.

Catalysts

A financial technology company, develops software platforms and tools that focuses on providing payment acceptance and disbursement capabilities in North America, Europe, and Asia.

• Strong international revenue growth and the activation of European partnerships will likely drive top line growth, impacting Ryvyl’s revenue.
  
• Expansion of Visa Direct integration into new countries and leveraging Visa’s network should fuel revenue growth by increasing transaction volumes and market reach.
  
• Strategic partnerships, such as those with North American licensing partners and payment tech firms, will potentially drive new opportunities and add to Ryvyl’s pipeline, positively affecting revenue and earnings.
  
• The private label partnership and PayFac as a Service model should reduce operational costs while enhancing margins and promoting earnings growth due to per transaction fees and reduced compliance risks.
  
• AI and blockchain advancements being utilized for operational efficiencies and compliance could improve net margins by reducing overhead and errors while securing a competitive advantage in the market.

Ryvyl Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ryvyl's revenue will grow by 28.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -47.9% today to 2.1% in 3 years time.
• Analysts expect earnings to reach $2.5 million (and earnings per share of $0.15) by about April 2028, up from $-26.8 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 15.5x on those 2028 earnings, up from -0.3x today. This future PE is greater than the current PE for the US Diversified Financial industry at 14.0x.
• 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 11.41%, as per the Simply Wall St company report.

Ryvyl Future Earnings Per Share Growth

Risks

• The text notes there were issues with third-party software implementations and integration delays, particularly in Europe, which affected the company's growth in Q3 2024 and could potentially disrupt future revenue streams and operating efficiency.
  
• Ryvyl experienced a notable decrease in total revenue from $17.5 million in Q3 2023 to $12.6 million in Q3 2024, which may impact investor confidence regarding the firm's ability to sustain earnings growth.
  
• Adjusted EBITDA was reported as a negative $1.7 million in Q3 2024, down from $50,000 in Q3 2023, signaling potential pressures on profitability and operational efficiency.
  
• The company's net working capital was negative as of September 30, 2024, which could hinder its ability to fund ongoing operations and sustain financial flexibility for growth initiatives.
  
• The memorandum of understanding to restructure its balance sheet involves significant payouts to address convertible note and preferred stock obligations, which could strain cash flow if not managed effectively, impacting net margins.

Valuation

• The analysts have a consensus price target of $2.75 for Ryvyl based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $119.5 million, earnings will come to $2.5 million, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 11.4%.
• Given the current share price of $0.94, the analyst price target of $2.75 is 65.7% 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.