After months and months of nothing more than declines, the stock price of Marqeta (MQ) is finally showing some light. The strong headwinds of the crisis in Ukraine have not deterred Marqeta, whose shares are roughly at the same levels seen in early February.
Could this be a sign that the market is slowly gaining confidence in this stock? There are reasons to believe this and support the thesis of more upside in the share price. So as things stand, I am bullish about Marqeta.
Since the stock price doesn't even look expensive based on some technical indicators, there are additional points to add to the merit of this stock.
About MarqetaMarqeta operates a card issuance platform for creating customized and innovative payment cards.
Marqeta's payment infrastructure enables customers to perform the following activities: launch and manage their own card programs, issue cards, and authorize and complete payment transactions.
Headquartered in Oakland, California, Marqeta states it is certified to operate in 39 countries around the world.
Marqeta Stands Out amid an Overall Bearish ContextCurrently, the market is facing strong headwinds due to severe issues such as the war in Ukraine, record inflation, and a high risk of stagflation, making it very difficult to counteract.
Among the technology stocks, which have been hit very hard by the market headwinds so far, are those that don't intend to weather the storm but continue to fuel their shareholders' growth expectations, as Marqeta does.
I think investors will soon be able to bet big on Marqeta.
Marqeta's Fast-Growing MarketMarqeta is active in the fast-growing digital payment solutions market, which will grow by 20.5% each year from 2022 to 2030, according to Grand View Research. Growing customer appreciation for real-time payments will be the biggest contributing factor to market expansion.
The next expansion of the digital payments market should create opportunities for a wide range of operators, including Marqeta, and not just for more established names.
The turning point came during the COVID-19 crisis when budget limits for contactless payments were increased to ensure social distancing at the time of payment.
The rise of anti-fraud technologies has enabled global regulators to allay more concerns about using digital payments to regulate transactions between merchants and consumers worldwide.
Marqeta's TrendsMarqeta appears to fit well in this context of renewed growth, as evidenced by encouraging trends from its Q1-2022 earnings report.
Market participants are increasingly gaining confidence in the payment technology of the software application company based in Oakland.
Thanks to a strong increase in payment volume ($37 billion in Q1 2022 versus $33 billion in Q4 2021), Q1 2022 revenue of $166 million was 53.7% higher than the previous year, surpassing the analyst median of $161.3 million.
It posted EPS -$0.11 against the consensus of -$0.08, but this doesn't really count at this point, as it's a normal consequence of heavily investing in safe trades and customer-oriented solutions.
In May, Marqeta announced a series of strategic partnerships with the below-mentioned companies to expand its program management capabilities and offerings in Europe and the United Kingdom.
These partners are Evolve Bank, a provider of various technology-based financial services, Alviere, a provider of solutions for the implementation of various financial services, and Klarna, the issuer of the Klarna Card. This is a Visa (V) card that can be used to make in-store and online purchases and pay at a later date.
Furthermore, on June 7, Marqeta announced a partnership with U.S. global money movement and payment services provider The Western Union Company (WU). The goal of this partnership is to integrate Marqeta's solutions with the e-wallet and e-banking platform of Western Union for European transactions.
The OutlookThe company's goal now is to increase visibility and carve out its context in a global market that promises to be very profitable in the future. The significant improvement in the total payment volume (+53% year-over-year), what really matters at the moment, indicates Marqeta should be on the right path.
Expected strong growth in retail e-commerce (up 50% over the next four years to $7.4 trillion by 2025, Statista estimates), along with the development of digital payments, should provide valuable support to the growth project of Marqeta.
Wall Street's TakeIn the past three months, 10 Wall Street analysts have issued a 12-month price target for Marqeta. The stock has a Strong Buy consensus rating based on nine Buys, one Hold, and zero Sell ratings.
The average Marqeta price target is $13.45, implying 40.3% upside potential.
ValuationShares are changing hands at $9.59 as of the writing of this article for a market cap of $5.2 billion, a price-to-earnings ratio of -24.7, a price-to-sales ratio of 9.1, and a 52-week range of $6.05 to $37.90.
Also, the 50-day moving average is $10.00, while the 200-day moving average is $16.53. So, the stock looks cheaper today than it has in the past few weeks. Given its affordable price and growth prospects, I think this stock is attractive despite the current headwinds in the market.
ConclusionMarqeta has now been in uptrend mode for three months. This could be a sign that this stock is making its way into the good books of market traders.
Positive trends on some metrics, attractive portfolio additions, and a favorable outlook for the market suggest that this stock could have strong growth potential that the market is already evaluating favorably.
Alberta-based Canadian Utilities (TSE: CU) (CDUAF) is a diversified multinational energy infrastructure corporation providing solutions in Electricity, Pipelines & Liquid, and Retail Energy.
By delivering natural gas and electricity to neighborhoods all across Alberta and Northern Canada, keeping the lights on in Mexico powered by green hydroelectricity, evolving the electricity system in Puerto Rico, or designing highly efficient natural gas-powered power plants across Australia, the scope and scale of Canadian Utilities' businesses are indeed global.
What truly distinguishes Canadian Utilities not only among its industry peers but the rest of Canada's listed companies, in general, is that it boasts the longest track record of consecutive dividend increases in the country. Specifically, Canadian Utilities has increased its annual dividend every year for the past 50 years, without exception.
Through multiple recessions, several periods of unfavorable economic environments, and, most recently, a pandemic, Canadian Utilities's operations have continued producing resilient results.
Shares of regulated utilities tend to offer minimal returns from a capital gains standpoint, with their dividends usually comprising the majority of investors' total returns potential. This is the case with Canadian Utilities as well. Despite its continuously robust dividend increases, the stock is currently trading at practically the same levels it did back in 2013.
However, precisely due to the performance of such companies being exceptionally resilient, they suffer substantially less during times of increased uncertainty. For instance, the ongoing trading environment, which includes elevated inflation levels, geopolitical turmoil, and significant macroeconomic concerns, has scared investors leading to massive losses in equities.
Yet, shares of Canadian Utilities have risen by more than 10% over the past year, as investors have flocked to the company's highly predictable cash flows and reliable investment case.
On the one hand, Canadian utilities' performance should remain solid for years to come, and the stock is likely to sufficiently meet the needs of income-oriented investors.
On the other hand, the pace of dividend growth is likely to remain softened going forward amid a relatively elevated payout ratio. Shares are not particularly cheap as well. For this reason, I am neutral on the stock.
Recent PerformanceCanadian Utilities' performance came in quite vigorous for the first three months of Fiscal 2022. I have converted all numbers from Canadian Dollars to U.S. Dollars moving forward, unless otherwise noted, for your convenience.
For Q1, revenues and EPS totaled $860 million and $0.61 per share, suggesting an increase of 22.3% and 41.0%, respectively, in constant currency.
The increase in revenues was mainly the result of rate relief provided to customers last year amid the COVID-19 pandemic. During and subsequent to the quarter, the company focused on collecting these deferred revenues, which it had neglected last year, in order to help its customers navigate the challenging environment at the time.
The growth in EPS was primarily the result of the timing of operating costs in the Natural Gas Distribution business as well as increased learnings from the company's International Electricity Operations. The ongoing highly-inflationary environment positively impacted Canadian Utilities, as earnings in the International Natural Gas Distribution business improved as well.
Based on the company's Q1 results and quite predictable operating performance, my model points towards Fiscal 2022 EPS of close to $1.80. This comes quite close to consensus estimates, which point towards Fiscal 2022 EPS of C$2.29, which converts to $1.79 at the current CAD/USD rate.
Is the Dividend Worth It?Canadian Utilities' current annualized dividend rate of C$1.7768 converts close to US$1.39 at the current CAD/USD rate. With shares trading at US$31.31, the stock currently yields close to 4.4%. This is slightly lower than the stock's historical average amid its recent rally. Yet, it remains at rather substantial levels, relatively speaking.
The 10-year dividend per share CAGR stands at around 5.6%, which is a rather satisfactory dividend hike rate for a utility company. However, note that payouts in USD include FX effects, which somewhat influence this number - not by a substantial margin, nonetheless.
In any case, I believe that Canadian Utilities' dividend growth prospects are set to remain subtle moving forward due to the payout ratio reaching elevated levels.
At the current dividend per share annualized run rate and projected EPS for the year, the payout ratio stands at 77%, and that includes boosted results following last year's revenue deferrals. In fact, softening dividend growth prospects is already appearing to be the case, with both of the company's two latest hikes being by just 1% each.
Wall Street's TakeTurning to Wall Street, Canadian Utilities has a Hold consensus rating based on five unanimous Holds assigned in the past three months. At $30.87, the average Canadian Utilities price target implies 1.4% downside potential.
TakeawayCanadian Utilities is a reliable company for income-oriented investors, with the company boasting half a century of uninterrupted annual dividend increases. However, the pace of dividend growth is likely to remain weak until the company's earnings reach a higher plateau, most likely.
Further, following the stock's recent rally, the stock's forward P/E stands at 17.3 based on my EPS forecast and consensus estimates. I find this multiple quite rich, considering the company's growth (being a regulated utility) has historically not exceeded the single-digits.
Investors are likely to continue paying a premium for the stock due to its tested qualities and robust dividend in the current uncertain environment, nonetheless.