Will Expensify Get Even Cheaper To Buy?

Expensify Moves Lower After Results Fail To Impress 

Expensify NASDAQ: EXFY caught our attention when it emerged from its post-IPO quiet period. A handful of name-brand sell-side analysts came out in support of the company with a consensus price target that implied more than 30% of upside for the stock. Now, in the wake of the company’s first earnings report as a publicly-traded company, the analysts have begun rethinking their positions if only to lower their price targets. Bank of America was the first to do it, lowering the price target to $42 from $45 and still predicting a healthy 25% of upside for the stock, and it may not be the last.

What this means to us is that, If you were interested in this company two weeks ago you should still be interested in it now. Expensify offers a unique means of consolidating corporate spending and its usage is growing. It may take another couple of quarters but we are expecting to see business momentum begin to build. 

Expensify Has A Robust 3rd Quarter, Guides For Growth 

Expensify had a great quarter if one that was more or less expected by the analysts. The company reported $37.4 million in net revenue for a gain of 72.4% over last year but only 115 basis points better than the Marketbeat.com consensus estimate. The gains came on a 4.4% sequential increase in average monthly users the company attributed to increased ad spending and the rollout of its Free version. The Free version allows SMB’s to deploy Expensify applications across their networks at no cost, a plan that is intended to drive usage of financial services like the Expensify cash-back card and drive total revenue. 

“The biggest news coming out of Q3 was the launch of our Free Plan for SMBs. It offers all the basics of Expensify for free – including corporate cards with up to 2% cashback, reimbursements, bill pay, invoicing, and travel booking ..,” said David Barrett, founder, and CEO of Expensify. “We're especially excited to watch our Free Plan spread naturally across organizations as a result of our viral, bottom-up business model and the immense greenfield opportunity that still remains in our target market.”

Moving down the report, the details are a little mixed but generally good. The company reported a net loss of $0.18 per share, $0.07 worse than expected, due to higher than expected bonus costs related to the IPO but the adjusted earnings were much better. Adjusted net income came in positive and up from the previous quarter on leveraged gains and revenue strength. 

Looking forward, the company is guiding for sequential growth driven by a 1% to 3.75% in average monthly members. This should produce revenue in the range of $38.3 to $39.2 or sequential revenue growth of 2.1% to 4.8% with only one thing to mar it. The analysts are expecting revenue near $38.8 million or very near the mid-point of the range. 

The Technical Outlook: Expensify Might Be Bottoming 

Shares of Expensify began to bottom when the analysts first came out with their bullish ratings and that action is continuing now. The earnings report caused price action to fall to a new low but buyers were ready for the move and confirmed support at the $34 level. If the market follows through on this action we expect to see the price move up to the $38 and $40 levels in the near to mid-term. If not, this market could be in for another new low.