This tumbling ASX fintech should be 3 times current price: analyst

The market savaged this micro-investment provider, causing one fund manager to tear his hair out. But maybe it’s now turned a corner?

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One ASX financial stock has been savaged in the past month but that just doesn’t match up with its fundamentals.

That’s according to Cyan Investment Management portfolio manager Dean Fergie, who’s frustrated by the market’s treatment of RAIZ Invest Ltd (ASX: RZI).

Over the month of May, the micro-investment app’s shares sank 13%, from $1.53 to $1.33.

“We have been somewhat perplexed by the weakness in consumer investment platform Raiz’s share price in recent months,” Fergie said in a memo to clients. 

“Raiz’s performance is at odds with a strong underlying market and the company’s continued growth in both FUM and customer numbers.”

He could only attribute the negative sentiment to “some indigestion and associated selling” from a $10 million share placement in late April.

US version of Raiz worth $2.8 billion

Raiz allows users to round-up everyday purchases and put those cents into investments such as shares.

It was originally the Australian version of US company Acorns. The local version rebranded and became independent of its American parent in 2018.

Acorns in the US announced recently that it would list on the NASDAQ via a special-purpose acquisition company (SPAC), in a deal that values the business at about US$2.2 billion ($2.8 billion).

To Fergie, that backed up his bullishness on Raiz.

“On similar valuation metrics such as customer numbers and FUM [funds under management], would value Raiz at somewhere around AUD$4 per share or 3 times its current pricing.”

Rest of market starting to wake up

It seems other investors have woken up to what Fergie is indicating.

Raiz shares rocketed 7.14% on Wednesday morning to trade at $1.50. That’s almost a 13% pick up in the first few days of June.

This week the company revealed funds under management have reached $750 million. According to Raiz, this keeps it on track to achieve its previously stated goal of $1 billion by the end of this year.

According to The Motley Fool’s Brooke Cooper, Raiz now has 76.2% more funds under management than 12 months ago.

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Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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