GDPR And CCPA Constraints And Consolidation Will Compress Future Prospects

Key Takeaways

• Regulatory tightening and data privacy laws threaten to undermine Riskified's AI-driven fraud detection, reducing revenue growth and client retention.
  
• Rising competition, industry consolidation, and commoditization risk shrinking its addressable market, compressing margins, and further delaying sustained profitability.
  
• Accelerating online fraud, diversified expansion, continuous innovation, strong customer adoption, and financial discipline position Riskified for sustained growth and increased long-term earnings resilience.

Catalysts

Develops and offers an e-commerce risk intelligent platform that allows online merchants to create trusted relationships with consumers in the United States, Europe, the Middle East, Africa, the Asia-Pacific, and the Americas.

• Growing regulatory constraints around privacy, particularly in key markets governed by GDPR, CCPA, and potentially incoming US federal regulations, threaten to limit Riskified's access to consumer data that underpins its fraud detection models; this would directly undermine the efficacy of its core AI solutions and significantly weaken its revenue growth prospects as merchants may seek alternative providers with more robust compliance or their own in-house solutions.
  
• Sustained global economic deceleration and ongoing pressures in discretionary e-commerce categories, as seen in Fashion, Luxury, and Tickets, suggest that overall transaction volumes may remain subdued or decline, further dampening future revenue expansion and stalling growth in gross merchandise volume, with limited visibility for upside given soft same-store sales and tough year-over-year comparables.
  
• Intensifying industry consolidation and platform integration in digital payments and commerce, with entities like Stripe, Shopify, and Adyen building out their own fraud prevention capabilities, pose an existential threat to Riskified's position as a standalone provider and could permanently shrink its total addressable market, placing long-term downward pressure on revenue and compressing net margins.
  
• Advancements in generative AI and open-source fraud prevention tools have accelerated commoditization, threatening to erode Riskified's differentiation; as technical barriers diminish, competitors-including large in-house merchant teams and well-funded startups-could force aggressive price competition, lowering Riskified's pricing power and resulting in sustained margin compression and delayed profitability.
  
• High merchant concentration, especially in volatile or declining verticals, leaves Riskified vulnerable to large customer churn or downward renegotiations, exacerbated by persistent net losses and stagnant gross margins; this creates the risk of material declines in annual revenue, structural impairment to operating leverage, and an inability to achieve durable, positive net earnings regardless of incremental product innovation.

Riskified Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Riskified compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Riskified's revenue will grow by 9.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -11.7% today to 4.1% in 3 years time.
• The bearish analysts expect earnings to reach $17.8 million (and earnings per share of $0.11) by about August 2028, up from $-39.3 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 44.3x on those 2028 earnings, up from -18.6x today. This future PE is greater than the current PE for the US Software industry at 35.0x.
• Analysts expect the number of shares outstanding to decline by 4.4% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.52%, as per the Simply Wall St company report.

Riskified Future Earnings Per Share Growth

Risks

• The accelerating sophistication and complexity of online fraud, especially in emerging areas like Agentic Commerce and AI-driven attacks, increases the need for advanced fraud prevention solutions, positioning Riskified to capture higher demand and potential revenue growth as merchants become more reliant on best-in-class protection.
  
• Riskified is expanding into new verticals such as Payments, Remittance, and Travel, and gaining traction internationally, which diversifies its merchant base and offers opportunities for sustained top-line growth and improved earnings across new markets.
  
• Ongoing innovation demonstrated by successful product launches like Policy Protect, Adaptive Checkout, and partnerships such as with HUMAN Security highlights the company's ability to continuously enhance its platform, which can lead to higher customer retention, stronger pricing power, and recurring revenue growth.
  
• The company is seeing consistent upsell activity within existing customers and exceptionally strong growth in new products, with double-digit adoption rates and over 100% year-over-year revenue growth contribution from offerings like Policy Protect, which supports margin expansion and steady revenue increases.
  
• Operational discipline, reflected in sustained positive adjusted EBITDA for seven consecutive quarters, declining operating expenses as a percentage of revenue, strong free cash flow, and a debt-free balance sheet, provides Riskified with the financial flexibility to invest in growth initiatives and drive long-term earnings resilience.

Valuation

• The assumed bearish price target for Riskified is $4.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Riskified'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 $8.0, and the most bearish reporting a price target of just $4.5.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $434.9 million, earnings will come to $17.8 million, and it would be trading on a PE ratio of 44.3x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $4.65, the bearish analyst price target of $4.5 is 3.3% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• 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.