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MoneyGram Focused on Growth; Time to Hold the Stock?
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Shares of MoneyGram International, Inc. have gained a whopping 95.6% year to date, significantly outperforming the 6.1% growth for the Zacks categorized Miscellaneous Financial Services industry. Notably, the considerable upward movement in the price largely reflects the reaction to the U.S. presidential election.
We see potential upside for the stock, given the company’s focus on product lunching, global expansion and expense management.
MoneyGram’s third-quarter 2016 total revenue was $383.1 million, up 4% on a reported basis and 5% on a constant currency basis. The quarter witnessed 4% growth in money transfer revenues. Also, non-U.S. revenues climbed 4% led primarily by Europe, but offset by headwinds in the Middle East and parts of Africa. Further, U.S. outbound revenue grew 8%.
What Should Favor the Stock Ahead?
The Dallas, TX–based company should reap benefits from its continued focus on digitization. The company’s investment in innovative products and services, particularly Digital/Self-Service solutions such as moneygram.com, mobile solutions, account deposit and kiosk-based services, help to enhance revenue growth and diversify its product offerings.
MoneyGram expanded its digital footprint in the third quarter, adding direct-to-account services into 16 new countries. Also, during the quarter, moneygram.com set a record by attracting more than 225,000 new active customers.
Further, the company has not only strengthened its presence in high-growth potential markets of Latin America, the Asia Pacific, Western and Eastern Europe; but also improved its position in the weaker markets, notably owning about 13% market share in Mexico. It has also penetrated several unexplored and underdeveloped global markets of the Middle East, South America, Vietnam and Myanmar.
While expanding its distribution channels, MoneyGram aims to create new products and services through acquisitions and strategic alliances. In Oct 2016, MoneyGram, strengthening its relationship with its largest agent, Walmart, announced the Walmart2Walmart Mexico product, which creates opportunities for incremental volume in the near term.
In addition, the guidance for 2016 looks impressive. The company expects constant currency revenue growth of 7–9% and constant currency adjusted EBITDA growth of 9–11%.
However, we remain apprehensive due to several headwinds, including stiff competition, stricter regulations and forex volatility. Also, economic and geopolitical issues in some of its remittance markets might hinder top-line growth.
Currently, it is difficult to get too excited about this stock given the near-term concerns. However, looking at the fundamentals, hanging on the stock should not disappoint investors. Over the past 30 days, the Zacks Consensus Estimate remained unchanged at 61 cents for 2016 and at 79 cents for 2017.
MoneyGram carries a Zacks Rank #3 (Hold).
Stocks to Consider
E*TRADE Financial Corp. : Over the last 60 days, the Zacks Consensus Estimate for the current year increased 2.2% to $1.83 and advanced 6.9% to $1.87 for 2017. The company sports a Zacks Rank #1 (Strong Buy).
Synchrony Financial (SYF - Free Report) : The Zacks Consensus Estimate inched up 1% for both 2016 and 2017 to $2.68 and $3.08, respectively. The company carries a Zacks Rank #2 (Buy).
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MoneyGram Focused on Growth; Time to Hold the Stock?
Shares of MoneyGram International, Inc. have gained a whopping 95.6% year to date, significantly outperforming the 6.1% growth for the Zacks categorized Miscellaneous Financial Services industry. Notably, the considerable upward movement in the price largely reflects the reaction to the U.S. presidential election.
We see potential upside for the stock, given the company’s focus on product lunching, global expansion and expense management.
MoneyGram’s third-quarter 2016 total revenue was $383.1 million, up 4% on a reported basis and 5% on a constant currency basis. The quarter witnessed 4% growth in money transfer revenues. Also, non-U.S. revenues climbed 4% led primarily by Europe, but offset by headwinds in the Middle East and parts of Africa. Further, U.S. outbound revenue grew 8%.
What Should Favor the Stock Ahead?
The Dallas, TX–based company should reap benefits from its continued focus on digitization. The company’s investment in innovative products and services, particularly Digital/Self-Service solutions such as moneygram.com, mobile solutions, account deposit and kiosk-based services, help to enhance revenue growth and diversify its product offerings.
MoneyGram expanded its digital footprint in the third quarter, adding direct-to-account services into 16 new countries. Also, during the quarter, moneygram.com set a record by attracting more than 225,000 new active customers.
Further, the company has not only strengthened its presence in high-growth potential markets of Latin America, the Asia Pacific, Western and Eastern Europe; but also improved its position in the weaker markets, notably owning about 13% market share in Mexico. It has also penetrated several unexplored and underdeveloped global markets of the Middle East, South America, Vietnam and Myanmar.
While expanding its distribution channels, MoneyGram aims to create new products and services through acquisitions and strategic alliances. In Oct 2016, MoneyGram, strengthening its relationship with its largest agent, Walmart, announced the Walmart2Walmart Mexico product, which creates opportunities for incremental volume in the near term.
In addition, the guidance for 2016 looks impressive. The company expects constant currency revenue growth of 7–9% and constant currency adjusted EBITDA growth of 9–11%.
However, we remain apprehensive due to several headwinds, including stiff competition, stricter regulations and forex volatility. Also, economic and geopolitical issues in some of its remittance markets might hinder top-line growth.
Currently, it is difficult to get too excited about this stock given the near-term concerns. However, looking at the fundamentals, hanging on the stock should not disappoint investors. Over the past 30 days, the Zacks Consensus Estimate remained unchanged at 61 cents for 2016 and at 79 cents for 2017.
MoneyGram carries a Zacks Rank #3 (Hold).
Stocks to Consider
E*TRADE Financial Corp. : Over the last 60 days, the Zacks Consensus Estimate for the current year increased 2.2% to $1.83 and advanced 6.9% to $1.87 for 2017. The company sports a Zacks Rank #1 (Strong Buy).
Virtus Investment Partners, Inc. (VRTS - Free Report) : The Zacks Consensus Estimate for 2016 climbed 6.7% to $5.75 and 20.7% for to $7.88 for 2017. The company also boasts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Synchrony Financial (SYF - Free Report) : The Zacks Consensus Estimate inched up 1% for both 2016 and 2017 to $2.68 and $3.08, respectively. The company carries a Zacks Rank #2 (Buy).
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>