Goldman Sachs Targets Marqeta Stock, Rates Neutral
On Monday, Goldman Sachs began keeping track of shares in Marqeta Inc., a company known for providing financial technologies. They rated Marqeta's stock as "Neutral" and set a price target of $5.50. This means they think it's neither a strong buy nor a strong sell at this time.
What Does Marqeta Do?
Marqeta is a leading company in something called embedded finance. This is where companies integrate financial services, like credit card processing, directly into their applications and services. For example, Marqeta helps companies like Block Inc. with their Cash App card, a popular mobile financial app.
Positive Developments
Goldman Sachs is optimistic about Marqeta’s potential because of a couple of key initiatives:
- Early wage access programs: Imagine if you could access your earned salary before your payday. That’s what Marqeta offers.
- Partnership with Walmart: Marqeta is working with Walmart to improve financial services for its customers.
These efforts are expected to help Marqeta grow in the coming years.
Challenges Ahead
Despite the positive outlook, there are challenges:
- The U.S. market is highly competitive. For instance, Block Inc. already has a large share.
- International expansion and keeping strong relationships with companies like Block Inc. are crucial for Marqeta’s growth.
- As a white-label service provider (which means they offer services that other companies brand as their own), Marqeta doesn't have a lot of power to set high prices.
Valuation and Rating
Marqeta is valued at 33 times its estimated earnings for 2025, which includes factors like stock-based compensation (paying employees with company stock). Because of this high valuation and the mixed growth outlook, Goldman Sachs rates the stock as Neutral.
Recent Financial Performance
Recently, Marqeta announced strong results for the first quarter of 2024:
- Net revenue, gross profit, and adjusted EBITDA (a measure of earnings) were better than expected.
- Their total processing volume (TPV)—the amount of money processed through their services—increased by 33% compared to the previous year, hitting $67 billion.
- They also launched a stock buyback program worth up to $200 million.
Following these strong numbers, Citi reaffirmed its Buy rating on Marqeta, keeping a higher price target of $8.00. They were impressed by Marqeta’s plans and financial strategies.
What Is a Stock Buyback?
A stock buyback is when a company buys back its own shares from the market. This usually helps increase the value of the remaining shares. For instance, if there are fewer shares available, each one can become more valuable.
In summary, while Marqeta shows promising growth thanks to new programs and partnerships, it faces tough competition and limitations in the U.S. market. Both Goldman Sachs and Citi have different outlooks based on these considerations.
