Chime sticky user base base boosts stock price

Sanjay Sakhrani, KBW Research analyst, wrote in a research note on July 7, that harmony emerges as a winner in the part that meets the needs of low -income consumers. He made a “outstanding performance” rating, along with the price of $ 42.

CHIME was founded in 2012, and provides traditional financial services, such as fee verification accounts and savings accounts, for American consumers who get up to $ 100,000 a year. Sagriani says that these ordinary Americans do not serve well by traditional banks.

Sagriani said: “A few digital platforms have technology infrastructure, align the product market, and the speed of innovation required to serve this demographic effectively and profitable, and we believe that harmony is one of them.”

One of the biggest names in Fintech, Chime was a candidate for public subscription for years, and finally announced on June 12. The shares increased by 37 % during their first appearance. Since then, Chime has faced some initial fluctuations, but the stock has managed to stay higher than the public subscription price of $ 27. The shares were traded on Tuesday afternoon at more than $ 31.

Wall Street analysts usually do not issue research reports for a company until the subscription period ends, which lasts 25 days. General harmony went 26 days ago.

Growth

Estimates indicate that Chime has penetrated less than 5 % of the total processing market, which includes 196 million Americans earn up to $ 100,000 in annual wages. The startup company had 8.6 million active members as of March 31, as two -thirds of them depend on harmony as a basic bank, luck I mentioned earlier.

SAKHRANI believes that Chime may “successfully harness the base of the sticky users” to push the product’s accreditation and liquidation. Sagriani wrote that this focuses on starting the continuous growth in the average revenue for each active member, or Arpam, as it offers new offers. (Arpam is a measure that measures revenue from active organs.)

“We consider ARPAM as a basic driver for revenue over the next 2-3 years and a potential source of the upcoming organization to expectations near the period, as we believe that the company has followed a conservative approach to the model of contributions from four new launch operations for the expected products during the next 12 months.”

Harmony is not a bank and does not have a bank charter. Instead, you do a police with the Bancorp Bank and Stride Bank to provide its services.

Fintech has launched many new products in the past few years including instant loans, which provide users with access to up to $ 500 at a fixed interest rate, and the MyPay, which allows qualified members to obtain part of their salaries before the payment day. Sakhari said that MYPAY represents about 45 % of revenue growth throughout the year over the past two quarters. He said that it is expected that a lot of future growth of CHIME will come from credit and lending products such as MyPay and instant loans. Sakhariani said that harmony bears the risk of losing these products and is responsible for its banking partners for any default in unpaid balances. When Chime launches these new products, losing rates usually rise and decrease. “The ability to manage this risk will be the company’s key to growth.”

Chime depends on the exchange, and the fees traders are paid when the consumer uses an export or credit card issued by a resonant, to lead many of his revenues. Fintech recorded about $ 1.7 billion in the revenues of the fiscal year 2024 and 518.7 million dollars for the three months ending March 31, according to an organizational report. Sakrani said that nearly 75 % of Chime revenues depend on fees and are linked to exchange.

Chime faces strong competition from traditional financial institutions, such as Ally and Capital One, and a variety of different Fintech platforms targeting the same users as Sofi, confirmation and Cash App (owned by Block). Sagriani argues that many of these platforms have larger financial resources or larger user bases that may give them a competitive advantage, adding that “intensive competition can pose a risk to long -term sustainable growth.”

However, he is still optimistic about Fintech’s chances against its competitors, adding that “CHIME progress in space and a busy record of the very participating customer base puts them in a good competitive position, in our opinion.”