One of the hottest parts of the economy is fintech. This is essentially the disruption of the financial services industry with technology. These stocks have consistently among the best performers whether it was Visa (NYSE: V) or Mastercard (NYSE: MA) during the previous bull market or Square (Nasdaq: SQ) and PayPal (Nasdaq: PYPL) during this cycle.
So, many were eagerly awaiting the IPO of Marqeta (Nasdaq: MQ). Marqueta is known as the fintech company that is building the payments infrastructure behind several fast-growing tech companies such as DoorDash (NYSE: DASH), InstaCart, and Affirm Holdings (Nasdaq: AFRM).
Company Profile
Marqeta went public on June 9, opening at $32.50, which gave the company a valuation of $14 billion. This was above its pre-IPO range of $25 to $27, indicating strong demand. However, since going public, shares have backed off about 12%. The company sold 45 million shares and was able to raise $1.2 billion.
The company basically builds customized fintech solutions for its clients. For example, Instacart workers are issued a debit card which they can only use to purchase items selected by their customers. Its largest customer is Square as Marqeta enables the issuance of debit cards linked to Cash App accounts. It also enables users to receive direct deposit payments from employers or the government.
Marqeta had $290 million in revenue last year which was more than a 100% increase from 2019. In Q1, it had $108 million in revenue. Last year, it posted a net loss of $47.7 million, a slight improvement from a $58 million loss in 2019. In Q1, its total processing volume reached $24 billion, a 167% increase.
Currently, Square is its biggest customer, accounting for 70% of revenue. This is certainly a risk, however, its current contract runs till 2024. Marqeta does face competition from companies like Stripe, Adyen, Global Payments, and Fiserv.
Stock Price Outlook
Marqeta is in an interesting niche as it is able to build customized, fintech solutions for its customers that allow its business to grow and operate. Thus, it should continue to grow with its customers and be able to find new revenue sources.
Therefore, investors should look to accumulate a position in Marqeta especially as revenues are accelerating, the environment for growth stocks has become more favorable, and the company is trading near its pre-IPO levels.