Goldman Sachs initiates coverage on Chime Financial stock with Neutral rating

Investing.com - Goldman Sachs has initiated coverage on Chime Financial (NASDAQ:CHYM) with a Neutral rating and a price target of $34.00, as the stock trades near $31.32 after falling over 15% year-to-date.

The investment bank views Chime as one of the highest-quality consumer fintech companies due to its recurring, payments-driven revenue model and focus on primary account relationships, distinguishing it from peers that have grown through less-sticky products like lending. The company generates $1.8 billion in revenue with an impressive 87.75% gross margin, while maintaining strong liquidity with a current ratio of 3.8.

Goldman Sachs notes that Chime’s primacy-centric model can drive attractive unit economics, while the company remains relatively underpenetrated in lending, suggesting potential upside as it expands wallet share through products such as MyPay and Instant Loans.

The firm expects Chime to achieve strong incremental margins compared to the 2021 IPO cohort, with a possibility of reaching GAAP EBITDA profitability by 2026 in an optimistic scenario.

Despite positive fundamentals and customer value proposition, Goldman Sachs believes the lack of current profitability creates a near-term overhang, with valuation appearing "somewhat full at current levels," leading to the Neutral stance.

In other recent news, several investment firms have initiated coverage on Chime Financial, highlighting its growth potential and strategic positioning. Morgan Stanley (NYSE:MS) gave Chime Financial an Overweight rating with a $39 price target, citing its success in acquiring primary account status and consistent customer growth. Piper Sandler also rated the stock as Overweight with a $40 price target, emphasizing Chime’s innovative approach to serving a large market of Americans earning less than $100,000 annually. JPMorgan echoed this sentiment, noting Chime’s low-cost banking model and projecting 20% compounded revenue growth through 2027. UBS, while giving a Neutral rating with a $35 price target, acknowledged Chime’s strategy of avoiding punitive fees and its potential for increased profitability. Seaport Global Securities rated Chime Financial as a Buy with a $37 price target, forecasting revenue growth in the high 20% to low 30% range over the next two years. These recent developments suggest a strong interest in Chime’s ability to scale and deepen customer relationships.

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