06. April 2021 | 09:53 CET
Square, Marble Financial, Commerzbank - Generating high returns with innovations!
Innovation meets the financial industry. The terms fintech, proptech or insuretech, are often associated with it. The common denominator: technological innovations meet fields of application in established industries. Whether mass-market or niche, the new solutions often have the potential to shake up the industry. Usually, it is David versus Goliath. However, history also holds other possible scenarios in store. Sometimes the two cooperate, or an established player takes over the newcomer. We present three exciting stocks below. Who has the greatest potential?
time to read: 4 minutes by Carsten Mainitz
SQUARE INC - Innovation = Yield squared
Square Inc. is a financial services and mobile payments company based in San Francisco, California. It was launched in 2009 by, among others, the go-getting Twitter founder Jack Dorsey. The Company's basic idea was to offer customers an easy way to pay merchants by linking software and hardware products. That is, mobile devices and computing devices were to be transformed into payment and point-of-sale solutions. The Company came a significant step closer to its goal of building an entire "merchant ecosystem" with the launch of its Cash App. With the Cash App, private individuals have been able to send money since 2013. Since 2015, with Square Cash, this service has been available to businesses as well. That same year, the Company moved to the New York Stock Exchange floor at an offering price of USD 9, bringing Square USD 243 million for further growth.
Square put the money wisely into further organic expansion but also acquired several startups. The Company is innovative and has the right nose for trends, and this can be exemplified by its early acquisition of food delivery service Caviar in 2014. Five years later, Square sold the Company for around USD 400 million, at a multiple of the capital invested, to DoorDash, which is now listed and valued at over EUR 40 billion. More recently, Square acquired a majority stake in music streaming provider Tidal from its owner, US rapper Jay Z, for USD 297 million, adding a new business line to the Group.
When Square went public in 2015, the Company was valued at USD 2.9 billion, which was quite ambitious at the time. Square is an excellent example of how "expensive" can become relative. Today, the stock is trading at around USD 224, and the Company is now valued at a reasonable USD 100 billion. Too expensive? If you believe the analysts, then no. The experts still see an upside potential of almost 20% to USD 264. Given a share price ratio of 6 for 2022 and a 2022 P/E ratio of 295, the stock is an unreasonable price for value investors. However, it is no secret that strong growth can quickly put these visually high metrics into perspective. By 2020, over 30 million were already using the Cash App. Last year, Square generated nearly all of its revenue in the United States. With further market penetration in the US and global growth now picking up, the string of high growth rates could continue for a long time.
MARBLE FINANCIAL INC - Growth Booster: Market entry USA
Canadian fintech Marble Financial Inc. is all about its customers' "financial wellness." The Vancouver-based Company has created MyMarble, an innovative, data-driven and personalized platform that helps Canadians manage debt and improve their credit scores. Directly derived from this, users benefit through cheaper loans or rebuilding a credit score. The platform also relies heavily on user (further) education. Central to this is the Big Data-based analytical approach, which helps assess the customer's risk profile better and effectively targets customers with suitable products.
New collaborations and partnerships are enormously important for growth in the niche. The ambitious goal is to become the market leader in financial wellness. At the end of March, the Canadians announced a partnership with the country's oldest loan comparison platform, Loans Canada. With this move, Marble expects significant customer growth. But the real growth booster could prove to be the brand entry into the US, planned for the second half of the year. The US market is much larger and so is the debt per capita. To finance the first investments (especially marketing), the Company carried out a capital increase in the middle of last week. A total of 2.333 million shares were placed at a price of CAD 0.30, bringing Marble a gross inflow of CAD 0.7 million.
The planned expansion is a curse and a blessing at the same time because even if it is the same convincing logic as in the home market, startup costs are usually higher than planned. The expectation of further capital increases and thus dilutions for the existing shareholders is likely also to explain the recent decline in the share price. The fact is: Marble's business model is innovative, scalable and meets a demand in a niche that has not been addressed so far. In addition, the current market value of CAD 15 million is anything but lavish. Investors should add a few shares to their portfolio.
COMMERZBANK AG - Provisions for job cuts
One does not necessarily associate the term innovation with Commerzbank. For some investors, other terms with more negative connotations may come to mind. The recent, important corporate news "Commerzbank takes next steps in restructuring" should be taken seriously, despite its April 1 publication date.
The bank has been going through a restructuring and self-discovery process for some time. The German government, as a major shareholder, is certainly not making this any easier. As part of the necessary cost-cutting program, the Frankfurt-based bank announced plans to implement 1,700 redundancies by the end of the year through severance agreements as part of a "voluntary program". The bank set aside EUR 470 million in the first quarter, primarily due to the abovementioned measure.
Overall, Commerzbank had announced that it would spend around EUR 1.8 billion on restructuring as part of its Strategy 2024, of which EUR 1.4 billion has already been "used up," including this measure. By way of comparison, the Group's current stock market value is EUR 1.25 billion. Despite a strong position in German corporate banking and an average position in retail banking, "innovative" or dynamic growth areas (online banking in Germany with Comdirect, Polish digital bank and subsidiary mBank SA) are not sufficiently reflected in the figures. The industry continues to be forced to cut costs due to the low interest rate environment and falling margins. The strategically correct steps and the implementation of real innovations are now required.