Pagaya Technologies Cracked 'Achilles Heel' Of Many Marketplace Lenders: Analyst

JMP Securities analyst David M. Scharf initiated coverage on Pagaya Technologies Ltd. PGY with a Market Outperform rating and a price target of $2.75.

The analyst believes the company’s funding model, which relies on pre-funded securitizations and investment funds, has addressed funding disruptions.

Also, Scharf thinks PGY's credit analytics and machine learning benefit from a strong network effect by expanding beyond personal loans and successfully integrating directly into other lenders’ platforms. 

The analyst expects the company to benefit from the addition of lenders in personal loan and subprime auto markets, expansion into POS & BNPL financing partners, the buildout of its analytics engine for investors in the single-family rental market, and conversion of its pipeline discussions in the top 25 banks.

Scharf expects FY23 revenue and adjusted EBITDA estimates of $797 million and $47 million, respectively.

Also, for 2024, the analyst expects revenue of $1.01 billion (assuming network volume increases to $10.3 billion) and adjusted EBITDA of $100 million, reflecting robust operating leverage. 

The analyst estimates revenue of $1.21 billion and adjusted EBITDA of $135 million for FY25.

Price Action: PGY shares are trading higher by 2.3% at $1.9950 on the last check Monday.