It has been less than a month since Chime Financial went to the stock exchange, but the Neobank wins on analysts who are already writing bullish predictions about the prospects of the company.
On July 7, the KBW Research Anearch Analyst Sanjay Sakhrani wrote in a research note that Chime comes out as a winner in the segment that directs consumers with low incomes. He issued an “outperform” rating for Chime and a price target of $ 42.
Chime was founded in 2012 and offers traditional financial services such as free current accounts and savings accounts for US consumers who earn up to $ 100,000 a year. Sakhrani argues that these everyday Americans are not well served by traditional banks.
“Only a few digital platforms have the technology infrastructure, the orientation of the product markets and the speed of innovation that is necessary to serve this population group effectively and profitably, and we believe that Chime is one of them,” said Sakhrani.
One of the biggest names in Fintech, Chime, was an IPO candidate for years and finally went to the stock exchange on June 12th. Shares rose 37% during the debut. Since then Chime has come across an initial volatility, but the stock has made it over her $ 27 IPO price. The shares on Tuesday afternoon were traded with more than 31 US dollars.
Wall Street analysts usually do not spend any research reports for a company until the IPO retirement, which lasts 25 days, is over. Chime went to the stock exchange 26 days ago.
Room to grow
It is estimated that Chime has penetrated less than 5% of its total addressable market, which includes 196 million Americans who earn up to $ 100,000 in annual wages. The startup had 8.6 million active members on March 31, with two thirds of chime being instructed as primary bank. Assets previously reported.
Sakhrani believes that Chime has successfully used this sticky user base in order to promote increased product introduction and monealization. This positions the startup for continuing growth of the average sales per active member or Arpam because it opens up new offers, wrote Sakhrani. (Arpam is a metric that measures income that is achieved by active members.)
“In the next 2-3 years we see the ARPAM expansion as a core income driver and a potential source for the upward trend to short-term expectations, since we believe that the company has chosen a conservative approach to modeling contributions from four new product launches that can be expected in the next 12 months,” said Sakhrani.
Chime is not a bank and has no bank charta. Instead, it works together with Bancorp Bank and Stride Bank to offer their services.
FinTech has launched several new products in recent years, including instant loans that Offers User access to up to 500 US dollars to a fixed interest rate and MypayWhat enables justified members to receive part of their salary before payment day. In the last two quarters, MyPay has identified about 45% of Chime’s sales growth compared to the previous year, said Sakhrani. Much of the future growth of Chime is expected to come from loan and lending products such as MYPAY and instant loans, he said. Chime bears the risk of a loss in connection with these products and is liable to its banking partners for a failure for unpaid credit, said Sakhrani. When Chime brings these new products onto the market, the loss rates usually rise and then come down. “The ability to manage this risk is the key so that the company grows profitably,” said Sakhrani.
Chime is based on the exchange. The Fintech reported sales of around 1.7 billion US dollars for the 2024 and 518.7 million USD for the three months, which ended on March 31, according to A regulatory submission. Around 75% of the sales of Chime are subject to charges and are bound to the exchange, said Sakhrani.
Chime faces a tough competition of traditional financial institutions such as Ally and Capital One and a variety of different fintech platforms that aim at the same users as Sofi, Affirm and Cash app (in the possession of block). Many of these platforms have major financial resources or larger user base that can give you a competitive advantage, argues Sakhrani and adds that “intensive competition could be a risk of long -term sustainable growth”.
However, he remains optimistic about the opportunities of the FinTech against his competitors and adds that “Chime brings the leadership in the room and a strong track record of a highly committed customer base in a good position, in our opinion a good position.”
