JPMorgan initiates Chime Financial stock with Overweight rating on growth potential

Investing.com - JPMorgan initiated coverage on Chime Financial (NASDAQ:CHYM) with an Overweight rating and a $40.00 price target on Monday, representing nearly 28% upside from the current price of $31.32. According to InvestingPro data, analysts’ targets range from $33 to $37, suggesting potential upside ahead.

The financial services firm cited Chime’s success in scaling financial services as a non-bank by earning trust through its low-cost or no-cost banking model, which improves financial outcomes for customers historically affected by fees and minimum balance requirements. The company maintains strong liquidity with a current ratio of 3.8, and InvestingPro analysis indicates the stock is currently undervalued based on its Fair Value model.

JPMorgan noted that Chime has established the largest direct deposit base of any U.S. fintech to date, ranking as the sixth largest debit card issuer with over 20% purchase volume and member growth in 2024.

The firm highlighted Chime’s platform of 8.6 million members and its asset-light, spend-centric revenue model, which provides insights that enable the company to offer low-fee liquidity and lending products.

JPMorgan projects Chime will achieve 20% compounded revenue growth and more than 10 percentage points of adjusted EBITDA margin expansion through 2027, driven by a "virtuous cycle" of increased loyalty, spending, and new user acquisition.

In other recent news, Chime Financial successfully raised $864 million in its initial public offering, with shares priced at $27 each, surpassing its expected range of $24 to $26 per share. This IPO values Chime at approximately $11.6 billion on a fully diluted basis, making it one of the largest public offerings by a U.S. fintech firm in recent years. Additionally, Seaport Global Securities initiated coverage on Chime Financial with a Buy rating and a price target of $37.00, highlighting Chime’s strong brand and significant market opportunity. Seaport Global projects Chime will grow its revenue at an annual rate in the high 20% to low 30% range over the next two years. In contrast, UBS initiated coverage with a Neutral rating and a $35.00 price target, noting Chime’s growth potential and strategy of avoiding punitive fees. UBS forecasts an 18% compound annual growth rate for Chime’s transaction profit through 2028. These developments underscore the varied perspectives on Chime’s potential for growth and profitability in the financial technology sector.

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