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On Monday, DA Davidson analyst Gil Luria changed the outlook for Riskified Ltd. (NYSE: NYSE:RSKD), upgrading the stock from Neutral to Buy and increasing the price target to $7.00, up from the previous $5.00. Currently trading at $5.14 with a market capitalization of $843 million, InvestingPro analysis suggests the stock is undervalued relative to its Fair Value. The upgrade was influenced by several factors that suggest a strong potential for the company’s growth and profitability.
Luria cited "Strong Ecommerce momentum exiting the year" as a key driver for the positive reassessment of Riskified’s stock. The company’s recent performance supports this view, with revenue growing at 8.61% and maintaining a healthy gross profit margin of 53.69%. The analyst also pointed to "increasingly more sophisticated fraud threats" as a reason for the company’s favorable positioning in the market. These factors, along with the potential for Riskified to outperform the 2025 consensus numbers, led to the upgrade.
The analyst expressed confidence in Riskified’s future, noting the current valuation presents a "favorable risk/reward ratio." This view aligns with InvestingPro’s assessment, which rates the company’s overall financial health as "GOOD" with a strong current ratio of 7.13, indicating robust liquidity. This reassessment follows a period of uncertainty after a churn event that was previously announced. Despite this, Luria believes that the company’s outlook for 2025 has been effectively "de-Riskified," indicating that the concerns have been addressed and the future is looking more certain.
The potential for Riskified to exceed consensus expectations is supported by several growth avenues. New logo wins, cross-selling opportunities, and continued Gross Merchandise Volume (GMV) growth from existing customers are all seen as positive contributors to the company’s performance. InvestingPro data reveals the company holds more cash than debt on its balance sheet, providing financial flexibility to pursue these growth initiatives. These factors have given DA Davidson enough confidence to not only upgrade the stock rating but also to raise the price target. For deeper insights into Riskified’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The new price target of $7.00 is based on a 22x multiple of the company’s projected 2025 Free Cash Flow (FCF), reflecting a more optimistic view of Riskified’s financial prospects. Luria’s comments highlight the analyst firm’s belief that Riskified is well-positioned to capitalize on the current market dynamics and deliver value to its shareholders.
In other recent news, Riskified and Appriss Retail have announced a partnership to enhance fraud prevention in both in-store and online retail channels. This collaboration aims to integrate Riskified’s ecommerce fraud and risk intelligence with Appriss Retail’s return and claim authorization solutions. The partnership is designed to provide real-time protection for retailers by merging online and offline data, offering a comprehensive defense against omnichannel fraud and abuse. According to research commissioned by Riskified, returns, refunds, and exchanges represent a significant financial burden for retailers, with expenses estimated at $394 billion in key ecommerce markets. The new alliance seeks to address this challenge, potentially reducing overhead costs and losses for merchants. Eido Gal, CEO of Riskified, expressed enthusiasm about the partnership’s potential to deliver greater value and innovation to clients. Michael Osborne, CEO of Appriss Retail, highlighted the urgency of combating return and claim fraud, which has resulted in over $100 billion in losses, according to an annual returns report with Deloitte. This initiative represents a significant step in the evolution of omnichannel fraud prevention strategies.
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