On Tuesday, H.C. Wainwright maintained a positive stance on FlexShopper (NASDAQ:FPAY), keeping a Buy rating and a $2.50 price target on the stock. Currently trading at $1.58, the stock has shown significant volatility with a 31.7% gain over the past six months, despite an 8.1% decline in the past week.
InvestingPro analysis reveals 10+ additional investment insights for this stock, including key volatility indicators and growth metrics. The firm's optimism is based on the company's financial performance for October and November, which showed significant improvements over the same period in 2023.
FlexShopper reported a 15% increase in gross leasing revenue and a 25% rise in net lease revenue for the first two months of the fourth quarter of 2024. Additionally, the company has managed to reduce bad debt expense as a percentage of revenue by 600 basis points. According to InvestingPro data, the company maintains a strong gross profit margin of 86.2% and has demonstrated impressive revenue growth of 24.5% over the last twelve months.
The favorable financial results are attributed to successful strategies in both business-to-business (B2B) and business-to-consumer (B2C) channels. These results reflect positively on recent business changes, including better underwriting practices, higher customer quality, and improved account servicing. Although H.C. Wainwright has not altered its forecast model, the firm acknowledges the potential for upside to its fourth-quarter 2024 projections due to stronger lease gross margin trends.
Looking ahead, FlexShopper is expected to significantly expand its B2B offering in 2025. The company aims to grow its signed store count to 7,800, marking a 250% increase from the start of the year. This expansion is anticipated to drive additional lease originations throughout 2025 as the new locations become operational.
Furthermore, two potential catalysts for FlexShopper in 2025 are the pending rights offering and ongoing patent litigation. The rights offering, aimed at redeeming 91% of Series 2 Preferred Stock, is expected to contribute positively to earnings and help simplify the company's capital structure.
FlexShopper's current valuation, trading at 5 times the adjusted EBITDA estimates for 2025, is seen as undervalued by H.C. Wainwright. The firm suggests that as FlexShopper continues to demonstrate consistent results, investor interest in the undervalued shares is likely to increase. H.C. Wainwright recommends investors to take advantage of the current valuation levels to accumulate shares in anticipation of more favorable operating outcomes in the coming year.
In other recent news, FlexShopper has reported noteworthy changes in its board of directors and executive compensation, along with robust financial results. Sean Hinze has resigned from the board, and the company welcomed Denis Echtchenko as a new member. Also, an amendment to the employment agreement of CEO H. Russell Heiser Jr. includes a salary increase and an adjustment to his target bonus. The company's third quarter results revealed a 23% increase in total revenue, reaching $39 million, and a 45% rise in adjusted EBITDA, amounting to over $12 million.
The company's growth has been driven by an expansion in financing options and retail partnerships, with the number of retail locations using its services now around 7,800. H.C. Wainwright maintained a Buy rating on FlexShopper shares, recognizing the company's robust third-quarter performance and notable improvement in payment performance. The firm also highlighted two potential catalysts for FlexShopper in the coming year: a pending rights offering and ongoing patent litigation.
These are recent developments that highlight the company's robust financial performance and strategic growth initiatives. FlexShopper has seen significant growth in its B2C segment and secured two major partnerships this year. The company is also planning AI-driven automation for 2025 to further enhance payment performance and servicing capabilities.
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