Pagaya Technologies Ltd. (NASDAQ:PGY) stock prospects are looking increasingly better. Here, I charge that the shares are not expensive for what they offer.
Case in point, to say that Pagaya is priced at 19x next EBITDA doesn't do this investment thesis justice. Instead, I point to the fact that Pagaya's investment thesis is dramatically stronger than that of Upstart Holdings (UPST). Why? Primarily because Pagaya doesn't need to lean on its balance sheet to support its growth.
The business is much cleaner and leaner than Upstart's, with Pagaya's revenue growth rates likely to start to improve after the next quarter, Q3 2023.
There's a lot to be bullish about here.
As you read through Pagaya your mind intuitively compares and contrasts with Upstart. Indeed, they share a mission to enhance access to financial products, utilizing technology to provide more accurate credit evaluations.
The differences are subtle. Pagaya partners with financial institutions to enhance their lending capabilities, while Upstart engages directly with borrowers, by enabling them access to nonsecure loans.
In other words, Upstart is closer to being a loan originator, compared with Pagaya, which works with financial institutions.
PGY Q2 2023
PGY Q2 2023
Pagaya's underlying profitability is rapidly jumping higher. As you can see above, in Q2 2023, Pagaya's EBITDA profile was up 255% y/y. Meaning, my estimate for a 60% increase in EBITDA in 2024 should be reached with ease.
Altogether, this puts Pagaya priced at 19x next year's EBITDA. A multiple that I believe is attractive.
The Bottom Line
Upon thorough analysis, it becomes evident that Pagaya Technologies is positioned for a prosperous future, justifying its current stock valuation.
What truly sets Pagaya apart from Upstart, is its lean business model. Unlike Upstart, Pagaya doesn't overburden its balance sheet to fuel growth.
In essence, Pagaya's distinctive strengths, sound strategy, and growth potential make it an appealing prospect in the financial landscape. $Pagaya Technologies Ltd.(PGY)$ $Upstart Holdings, Inc.(UPST)$
SOURCE: SEEKINGALPHA
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