Should You Buy, Sell or Hold MoneyLion Before Q2 Earnings?

MoneyLion Inc. ML will report its second-quarter 2024 results on Aug 6, before the bell.

The Zacks Consensus Estimate for the bottom line in the to-be-reported quarter stands at a loss of a penny, indicating a 97.6% contraction in loss from the year-ago reported quarter. The consensus estimate for revenues stands at $127.4 million, implying 19.6% year-over-year growth. There has been no change in analyst estimates or revisions in the past 30 days.

Image Source: Zacks Investment Research

The company has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an earnings surprise of 116.4% on average.

Image Source: Zacks Investment Research

Q2 Earnings Beat Seems Unlikely

Our proven model doesn't conclusively predict an earnings beat for ML this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

ML has an Earnings ESP of 0.00% and a Zacks Rank #3.

Customers, Originations and Product Growth Expected

MoneyLion's business model allows it to optimize technology and use proprietary data sets through various customer insights, enabling it to innovate on technology and grow customers, originations and products. We expect these strengths to have gained traction in the to-be-reported quarter, enabling the company to improve on its top and bottom lines.

The Stock is in the Correction Phase

ML has rallied 26.6% in the past six months while plummeting 13.2% in the past three months and 13% in the past month. These price dynamics suggest that the stock is in a correction phase. The stock's recent performance is in line with its competitors. Intuit Inc. INTU has declined 6.7%, while Ally Financial Inc. ALLY has risen just 2% in the past month.

Image Source: Zacks Investment Research

A steep dip lately has brought ML stock into the undervalued zone. If we look at the forward 12-month Price/Earnings ratio, ML shares are currently trading at 16.09X forward earnings, below the industry's 21.86X. Based on forward 12-month Price/Sales, ML is currently trading at 1.1X, way below the industry's 6.78X.

Investment Considerations

MoneyLion's marketplace-first strategy and strong enterprise partner network drive cross-sell opportunities and revenue diversification. This approach enhances the company's ability to provide personalized financial decisions, detailed context, and community-driven insights, encouraging repeat usage.

MoneyLion has effectively integrated the strengths of marketplace and direct-to-consumer fintech business models. As a marketplace, the company can quickly scale product offerings, developing a network effect and information edge that appeals to more buyers and sellers. The direct-to-consumer aspect allows MoneyLion to maintain deep and direct relationships with its customers. In its enterprise business, ML continues to increase channel partners and vertically integrate with product partners, establishing itself as an essential customer acquisition and monetization partner within the financial services ecosystem.

Hold on for a Better Entry Point

Although MoneyLion's effective business model, strong top and bottom-line growth prospects, and expanding customer base all contribute to its potential for continued success, timing the market is crucial for maximizing investment returns.

The stock may undergo further correction, especially when ML does not seem poised for an earnings beat. We suggest that waiting for a more favorable entry point could be a prudent strategy rather than rushing to buy the stock before earnings.

To read this article on Zacks.com click here.