The most recent earnings report from MoneyLion signaled improving financial performance for the challenger bank, which achieved a fourth consecutive financial quarter in the black and advised investors it was targeting its first quarter of positive earnings per share sometime this year.
Analysts have generally been warm toward MoneyLion’s performance since it first achieved positive adjusted earnings before interest, taxes, depreciation and amortization in the first quarter of 2023. A survey of four analysts’ target prices for the stock, conducted by S&P Global Market Intelligence, put the target price for the stock at a median of $70.
“We believe the investor population is only beginning to discover this unique marketplace, combining data, customer-facing technology and enterprise offerings,” said George Sutton, partner and senior research analyst for Craig-Hallum. “With the model becoming profitable, it will open up the stock to an entirely new investor audience.”
Following its morning earnings announcement, MoneyLion stock traded at $59.46 at market open on Thursday, up from $52.55 at market close on Wednesday. The company reported positive adjusted EBITDA of $17 million in the fourth quarter of 2023 and is targeting $15 million to 18 million in the first quarter of 2024.
MoneyLion’s net loss (per generally accepted accounting principles) in 2023 was $45 million, an improvement from 2022, when the company had net losses of $190 million. Analysts polled by S&P collectively estimated this net loss would improve to $3 million in 2024 and become net income around $20 million in 2025.
One of MoneyLion’s main lines of business — the company describes it as its enterprise line, which it acquired by purchasing Even Financial in 2022 — is matchmaking between lenders and consumers. MoneyLion runs an advertising network to serve prospective borrowers with advertisements for various credit and loan products.
In February, MoneyLion announced a partnership with EY that aims to strengthen this line of business by combining it with Ernst & Young’s focus on core banking modernization services. Core modernization at regional and community banks can enable those banks to, among other things, offer products through MoneyLion’s marketing platform, hence the synergy between EY and MoneyLion.
The partnership promises better engagement with customers and the ability to “cater to the evolving needs of today’s digital consumer,” said Dee Choubey, CEO of MoneyLion, in a press release about the partnership. EY leadership echoed these comments.
“This will help empower smaller or more traditional banks to scale rapidly and profitably with integrated digital financial solutions,” said Nikhil Lele, financial services consumer banking leader for EY. Lele also leads the partnership with MoneyLion for EY.
MoneyLion also has a consumer line of business. MoneyLion’s free offerings include interest-free cash advances of up to $500 through its InstaCash product (tips and expedited delivery options are optional) and consumer credit comparison tools. Paid services include managed investment accounts ($1-5 monthly), mobile banking ($1 monthly) and its credit building product Credit Builder Plus ($19.99 monthly). The MoneyLion app also comes with features including financial literacy content served by a network of media influencers that the company has fostered.
The Consumer Financial Protection Bureau lodged a complaint against MoneyLion in 2022 over its Credit Builder Plus product and accused the company of predatory practices against consumers. MoneyLion continues to offer the product and fight the complaint that it violated the Military Lending Act by charging service members interest rates and fees that collectively exceed the law’s 36% rate cap.
The CFPB reached its conclusion by including in its interest calculation the $19.99 monthly fee for the product. But according to MoneyLion, besides providing members access to lines of credit, the membership fee also unlocks features such as credit monitoring, personal finance tracking tools and larger InstaCash maximums (up to $1,000). For this reason, MoneyLion has argued the membership fee should not be included as part of the interest rate calculations.
The proceedings in the case are currently on pause, pending a judgment on the constitutionality of the CFPB’s funding in the case CFPB vs Community Financial Services Association of America.