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On Wednesday, BTIG analyst Andrew Harte adjusted the rating for Flywire (NASDAQ: FLYW), moving it from Buy to Neutral. The downgrade comes as the financial technology company faces significant challenges, including headwinds in Canada and Australia that are more severe than previously anticipated. Management has also highlighted concerning trends in U.S. student visa applications, which Harte cites as a major worry for the upcoming year. According to InvestingPro data, the stock has fallen significantly over the last three months, with a current market capitalization of $2.2 billion. Despite recent challenges, InvestingPro analysis suggests the stock may be undervalued at current levels.
Flywire has been actively trying to expand its market presence to mitigate these difficulties, yet the company’s growth strategy is under strain. Traditionally relying on a net revenue retention (NRR) rate of 120%, Flywire’s growth model is currently considered highly vulnerable by BTIG. The analyst expressed a lack of confidence in the company’s ability to deliver consistent top-line growth and stressed the need for Flywire to demonstrate several quarters of steady performance to regain investor trust. However, InvestingPro data shows the company maintained strong revenue growth of 26.5% in the last twelve months, with a healthy current ratio of 2.33, indicating solid short-term liquidity.
In response to the uncertain business environment, Flywire announced a reduction in force (RIF) of 10% on Wednesday. This move is part of a broader effort to manage expenses, including an ongoing review of its portfolio. Despite these cost-controlling measures, Harte remains cautious, pointing out that external factors affecting the top line are too unpredictable to have a clear outlook on Flywire’s business trajectory for the rest of the year.
The downgraded rating reflects BTIG’s position that until Flywire can prove its capacity for consistent growth amidst these challenges, investor confidence may remain subdued. The firm is closely monitoring Flywire’s performance and will likely reassess its stance as the company navigates through these turbulent times.
In other recent news, Flywire Corporation reported its fourth-quarter 2024 earnings, which revealed a significant miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.12, falling short of the anticipated -$0.002, and revenue reached $117.6 million, below the expected $120.26 million. Revenue grew 17.4% year-over-year, but challenges in key markets, particularly Canada and Australia, were highlighted as contributing factors to the underperformance. Additionally, Flywire is restructuring, affecting 10% of its workforce, as part of efforts to realign resources with growth opportunities.
Analysts have responded to Flywire’s recent performance and outlook with downgrades. UBS analyst Timothy Chiodo downgraded Flywire’s stock from Buy to Neutral, reducing the price target to $15 from $25. Deutsche Bank (ETR:DBKGn) also downgraded the stock from Buy to Hold, lowering its price target to $16 from $26. The downgrades were driven by Flywire’s revised fiscal year 2025 revenue growth forecast, which falls short of analysts’ expectations.
Flywire’s forecast for 2025 anticipates FX neutral growth of 10-14%, excluding the impact of its acquisition of Certify. The company expects continued growth in its EMEA, UK, travel, and B2B segments, but challenges persist in the Canadian and Australian education markets, where revenue is expected to decline by over 30% year-over-year. Flywire’s acquisition of Certify is projected to contribute $35-40 million in revenue for 2025, supporting its strategic growth efforts. The company is undertaking an operational and strategic review to optimize its focus and address these challenges.
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