MoneyGram Jumps 15% On 3Q Sales Win; Street Sees 42% Downside

MoneyGram International shares rose 14.7% on Friday, in reaction to the company’s stronger-than-expected 3Q results, which benefitted from solid digital transactions. Its 3Q revenues of $323.2 million improved marginally on a year-over-year basis but came ahead of analysts’ estimates of $307.7 million. The money transfer company’s 3Q earnings of $0.16 per share compared favourably to the year-ago quarter’s loss of $0.03 per share and surpassed analysts’ estimate of $0.07.

MoneyGram (MGI) reported money transfer revenue growth of 5% year-over-year in 3Q, driven by a 10% transaction growth. Total digital transactions grew 106% year-over-year in 3Q, while online direct-to-consumer (MGO) cross-border transaction soared 176% in the quarter. Further, its adjusted EBITDA increased 33% year-over-year to $68.8 million.

MoneyGram’s CEO Alex Holmes said “Our customer-centric strategy and growing active customer base helped deliver year-over-year money transfer revenue growth for the quarter, while the strength of our Adjusted EBITDA and cash flow demonstrate how our investments to build a scalable infrastructure are paying off.” (See MGI stock analysis on TipRanks).

As for 4Q, the company anticipates total revenue growth of approximately 1% year-over-year, driven by “the continued strength of the money transfer business, offset by lower investment income.” MoneyGram also forecasts adjusted EBITDA growth of about 10% year-over-year for 4Q, led by “revenue trends coupled with the continued expense benefit from its Digital Transformation.”

Following the results, Northland Securities analyst Michael Grondahl said that the strong growth in the September ending quarter was “driven by rapid expansion of the digital business and continued recovery of the walk-in business.” However, Grondahl maintains a Hold rating on the stock as he remains concerned about the company’s high debt levels and weak cash flows.

Currently, the Street has a bearish outlook on the stock with a Moderate Sell analyst consensus. Given the year-to-date share price rally of 145.2%, the average price target of $3 implies downside potential of about 41.8% to current levels.