Fierce Regulation And Intense Competition Will Stifle Future Value

Key Takeaways

• Heightened regulation, macroeconomic pressures, and shifting investor preferences threaten to suppress transaction growth, reduce demand, and constrain Forge's platform earnings.
  
• Intensifying competition and irregular transaction volumes could compress margins, drive earnings volatility, and challenge Forge's path to sustainable profitability.
  
• Expansion of private market infrastructure, regulatory tailwinds, data partnerships, and efficiency improvements are positioning the company for recurring revenue growth and enhanced long-term profitability.

Catalysts

Operates a financial services platform in California.

• The increasing likelihood of heightened regulatory scrutiny and stricter disclosure requirements for private market transactions could significantly raise compliance costs and slow platform transaction growth, with long-term negative effects on both transaction-based and recurring revenue.
  
• A sustained shift in investor preference back toward public equities as IPO markets re-open and public market conditions stabilize threatens to decrease demand for private shares and sharply reduce Forge's transaction revenues over time.
  
• Persistent macroeconomic pressures, including higher interest rates and inflation, are expected to suppress venture capital funding and private company valuations, which will limit platform liquidity, depress transaction volumes, and constrain earnings growth.
  
• Competitive threats from established financial institutions entering private markets and emerging fintech challengers will likely compress fees and net margins, making it more difficult for Forge to achieve profitability and placing ongoing pressure on earnings.
  
• Forge's reliance on volatile, irregular transaction volumes-exacerbated by direct company-run liquidity events and broader industry disintermediation-could result in highly inconsistent revenue and poor earnings visibility, undermining any durable path to long-term margin expansion.

Forge Global Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Forge Global Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Forge Global Holdings's revenue will grow by 15.7% annually over the next 3 years.
• The bearish analysts are not forecasting that Forge Global Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Forge Global Holdings's profit margin will increase from -69.1% to the average US Capital Markets industry of 25.9% in 3 years.
• If Forge Global Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $36.3 million (and earnings per share of $2.27) by about August 2028, up from $-62.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, up from -4.6x today. This future PE is lower than the current PE for the US Capital Markets industry at 26.1x.
• 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 8.07%, as per the Simply Wall St company report.

Forge Global Holdings Future Earnings Per Share Growth

Risks

• Forge Global is experiencing record-breaking revenue and a significant improvement in adjusted EBITDA loss, driven by strong marketplace performance and growing transaction volumes from both institutional and individual investors, which could lead to improving revenue and earnings in the future.
  
• The company is seeing accelerating demand for its next-generation private market infrastructure across trading, data, custody, and wealth verticals, and is launching new products-such as index funds for non-accredited investors and registered funds accessible via 401(k) plans-that may drive long-term user growth and support recurring revenue expansion.
  
• Regulatory momentum is building for broader retail access to private markets, with bipartisan political support and ongoing discussions to loosen accredited investor requirements and allow private assets in retirement accounts, which could substantially increase Forge's addressable market and future revenue opportunities.
  
• Data partnerships with major financial information providers (e.g., Yahoo Finance, ICE Data Services, and Fortune Media) have positioned Forge's proprietary data products as industry standards, creating additional high-margin, recurring revenue streams that may support higher net margins and more stable earnings over time.
  
• Investments in operational automation, integration of recent acquisitions like Accuidity, and the build-out of technology-enabled features such as automated negotiation and scalable infrastructure are leading to increased operating leverage and cost efficiencies that improve the company's long-term profitability outlook.

Valuation

• The assumed bearish price target for Forge Global Holdings is $18.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Forge Global Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $18.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $140.6 million, earnings will come to $36.3 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 8.1%.
• Given the current share price of $21.13, the bearish analyst price target of $18.0 is 17.4% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• 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.