CompoSecure shares rise as Lake Street lifts target with buy rating

Lake Street Capital Markets increased its price target for CompoSecure Inc. (NASDAQ: CMPO) from $14.00 to $18.00, while keeping a Buy rating on the stock. The firm highlighted the potential impact of a formal partnership between Chase and Apple (NASDAQ:AAPL) for the Apple Card program, which could serve as a significant catalyst for CompoSecure due to its exclusive relationship with Chase.

The analyst from Lake Street Capital Markets noted that the Apple Card has achieved a cardholder base of 12 million in less than five years, a growth rate that surpasses industry averages. The program is estimated to contribute approximately $16 million annually to CompoSecure's revenue, according to conservative projections by the firm.

The analyst pointed to the early success of the Robinhood (NASDAQ:HOOD) Gold card. In May 2024, Robinhood reported over 1 million members on the waitlist for the card just one month after its official launch. By the second quarter of 2024, the number of cardholders had reached 50,000. The Robinhood Gold card has reportedly been well received by consumers, and the waitlist is believed to have expanded significantly beyond 1 million.

Lake Street Capital Markets remains optimistic about CompoSecure's growth prospects. The firm expressed confidence in the company's guidance, citing the valuation gap between CompoSecure and its competitors.

While CompoSecure currently trades at 8.7 times its projected 2025 Adjusted Earnings Per Share (EPS), its counterparts are trading at 21.0 times their 2025 Adjusted EPS. The upward revision in the price target to $18.00 reflects this optimism and the expectation that CompoSecure's valuation will align more closely with that of its peers.

CompoSecure Inc. has seen several key developments. The company reported two consecutive earnings beats, with net sales reaching a record $108.6 million in Q2, a 10% increase from the previous year. B.Riley and Compass Point have both maintained a Buy rating on CompoSecure, with Compass Point raising its price target to $14.50 following the company's strong financial performance.

Additionally, CompoSecure announced the completion of a stock purchase agreement that resolved its dual-share structure issues. Resolute Holdings acquired a 60% majority stake in CompoSecure through this transaction, valued at $372 million. This agreement resulted in the conversion of all Class B shares to Class A shares, simplifying the company's share structure and addressing tax inefficiencies.

Analysts from both firms expressed increased confidence in CompoSecure's prospects, citing a significant market shift from traditional plastic to metal payment cards. CompoSecure has also partnered with Robinhood Markets , Inc., and Fiserv (NYSE:FI) to produce the Robinhood Gold Card.

InvestingPro Insights

CompoSecure's recent performance aligns with Lake Street Capital Markets' optimistic outlook. According to InvestingPro data, the company has shown strong financial metrics and market performance. CompoSecure's revenue for the last twelve months as of Q2 2024 stood at $409.36 million, with a revenue growth of 4.71%. The company's profitability is evident from its gross profit margin of 52.05% and operating income margin of 33.25% for the same period.

InvestingPro Tips highlight that net income is expected to grow this year, and analysts have revised their earnings upwards for the upcoming period. This aligns with Lake Street Capital Markets' positive outlook on CompoSecure's growth prospects. Additionally, the company's strong return over the last year, with a 125.43% price total return, supports the analyst's confidence in the stock's potential.

The stock's recent performance is particularly noteworthy, with a 96.31% price total return over the last three months and a 103.84% return over the last six months. This robust performance is consistent with the analyst's view on the company's growth trajectory, especially considering the potential impact of partnerships like the Chase-Apple Card program.

For investors seeking more comprehensive insights, InvestingPro offers 14 additional tips for CompoSecure, providing a deeper understanding of the company's financial health and market position.

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