International payments facilitator Moneygram (NASDAQ:MGI) stock has arisen from the ashes as a turnaround play outperforming the year-to-date (YTD) performance of the benchmark S&P 500 index. MoneyGram is the third largest cross-border payment facilitator in the world enabling P2P payments in over 200 countries of which 81 are digitally enabled. Its digital transformation is producing noticeable top and bottom line improvements. The Company has been largely under the radar, overshadowed by the likes of PayPal (NASDAQ:PYPL), Square (NYSE:SQ) and even Western Union (NYSE:WU). The rise of cryptocurrencies has also been a growth driver in addition to forex tailwinds as highlighted in its Q3 2020 earnings release. With earnings approaching on Feb. 19, 2021, prudent investors may want to monitor opportunistic pullback levels for exposure in this transformative payment platform play.
Q3 FY 2020 Earnings Release
On Oct. 20, 2020, MoneyGram released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported diluted adjust earnings-per-share (EPS) profit of $0.16 excluding non-recurring items. Adjusted EBITDA increased 33% to $68.8 million year-over-year (YoY). Total revenues were $322.2 million, down (-1%) YoY. Money transfer revenue was $297.6 million, up 4% on a constant currency basis. Investment revenue was $3 million representing a (-$10.4 million) decline due to lower prevailing interest rates.
Total operating expenses improved 6% YoY at $286.6 million. The Company gained $8.9 million net benefit from Ripple market development fees and $6.3 million in forex gains related to currency movements from the pandemic. Net income was $10.9 million representing a return to profitability. The Company ended the quarter with $162.9 million in cash and cash equivalents. Despite COVID-19 uncertainties, the Company expects Q4 2020 to see a 1% topline improvement on continued money transfer growth offset by lower investment income and adjusted EDITDA growth of 10%.
Conference Call Takeaways
MoneyGram CEO Alex Holmes detailed its digital transformation strategy:
“Our consumer direct channel, MoneyGram Online (MGO) the largest component of our overall digital business has been a catalyst for new customer acquisition. Consumer demand for our app has been skyrocketing and 85% of our online transactions are now done on mobile devices. This business continues to be a significant driver of growth and profitability as we quickly scale.”
Despite the pandemic, the Company was able to deliver 5% YoY money transfer revenue growth. Growth returned in June and accelerated to 10% YoY in August and September with the month of October indicating 14% growth, excluding the U.S. to U.S. market. MGO customers grew 140% YoY recording a ninth consecutive month of triple digit cross-broker growth.
“Our business mix is increasingly shifting to digital and my view is that this will continue even as the walk-in business recovers.”, state Holmes. He went on to illustrate how the digital business offset losses in the walk-in business at physical locations during COVID-19. The lifting of restrictions improved U.K. walk-in business beyond pre-COVID levels. The Company views online and walk-in as two separate businesses with different customer profiles but expect both to grow but digital will continue to accelerate ahead in the business mix.
November Mobile App Update
On Nov. 9, 2020, MoneyGram provided November growth metrics. The Company saw 136% YoY growth in cross border transaction growth and a 135% YoY growth in its direct-to-consumer digital business. This is the eleventh consecutive month of triple digit YoY cross border transaction growth. MGO revenue growth in November, was the third largest in 2020. While critics will note that Q3 2020 net income gains can be pegged mostly on cryptocurrency (Ripple XRP) and forex gains, the YoY digital metrics can’t be understated. Shares are expensive and risk-tolerant investors should consider being patient enough to wait for opportunistic pullback levels to consider scaling into speculative positions.
MoneyGram Stock Chart
MGI Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provide a broader view of the price action playing field for MGI stock. The monthly rifle chart peaked off the $8.63 Fibonacci (fib) level to retest the monthly upper Bollinger Bands (BBs) at $7.78, with a rising 5-period moving average (MA) support at $5.58. The monthly stochastic mini pup remains intact as long shares don’t fall under the rising monthly 5-period MA. The weekly rifle charts formed a market structure low (MSL) buy trigger above $7.32 after the daily MSL triggered above $6.00. The weekly rifle chart formed a pup breakout with the 5-period MA support at $6.75 powered by the weekly stochastic mini pup which targets the upper BBs just above the $9.85 fib. Prudent investors can monitor for opportunistic pullback levels at the $7.32 weekly MSL trigger, $6.72 fib, $6.00 daily MSL trigger, $5.44 fib, and the $5.15 fib. The upside trajectories range from the $9.85 fib up towards the $21.41 fib if the monthly market structure high (MSH) trigger can breakout above $17.08.
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