Monness Crespi cuts Intermex stock rating to Neutral

Published 01/23/2025, 10:18 PM
IMXI
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Finally, the suspension of guidance by Intermex has raised concerns about the stability of the company's historically stable margin. With additional investments in digital customer acquisition and price investments to expedite the scaling of agent locations, there is a heightened risk of earnings estimate revisions to the downside or sideways in the near to medium term. Trading at a P/E ratio of 11x and showing potential upside according to InvestingPro's Fair Value analysis, investors seeking deeper insights can access comprehensive financial metrics and additional ProTips through InvestingPro's detailed research reports, available for over 1,400 US stocks including IMXI. Trading at a P/E ratio of 11x and showing potential upside according to InvestingPro's Fair Value analysis, investors seeking deeper insights can access comprehensive financial metrics and additional ProTips through InvestingPro's detailed research reports, available for over 1,400 US stocks including IMXI.

The downgrade was influenced by several factors, including uncertainty stemming from recent policy shifts regarding immigration from Latin America—a region that significantly contributes to Intermex's earnings compared to its peers. Analysts at Monness Crespi Hardt noted that this uncertainty is expected to limit the potential for multiple expansion or positive revisions to earnings per share estimates, especially without leveraging.

Moreover, the analysts pointed out the challenges faced by Intermex in bridging the digital/retail divide within the industry. Despite the acquisition of Amigo Paisano, which could potentially double the company's digital contribution, a considerable gap remains compared to competitors like Euronet and Western Union (NYSE:WU). The higher reliance on brick-and-mortar operations suggests that Intermex's growth may be slower.

Finally, the suspension of guidance by Intermex has raised concerns about the stability of the company's historically stable margin. With additional investments in digital customer acquisition and price investments to expedite the scaling of agent locations, there is a heightened risk of earnings estimate revisions to the downside or sideways in the near to medium term. Trading at a P/E ratio of 11x and showing potential upside according to InvestingPro's Fair Value analysis, investors seeking deeper insights can access comprehensive financial metrics and additional ProTips through InvestingPro's detailed research reports, available for over 1,400 US stocks including IMXI. The expectation is that both estimates and stock multiples are unlikely to see upward revisions, particularly through organic means, due to top-line mix challenges and potential concessions on margin to stimulate revenue.

Recent events, including the inauguration and the initial days of the new administration, have already impacted Intermex's share price due to headline risks. The fourth quarter of 2024 earnings and an Investor Day are scheduled for February 2025, during a period of strategic alternatives review. This timing suggests to the analysts that a near-term buyer is less likely, and the Investor Day could be the moment when estimates are adjusted to reflect digital strategy pursuits.

Finally, the suspension of guidance by Intermex has raised concerns about the stability of the company's historically stable margin. With additional investments in digital customer acquisition and price investments to expedite the scaling of agent locations, there is a heightened risk of earnings estimate revisions to the downside or sideways in the near to medium term. Despite these concerns, Monness Crespi Hardt still views MoneyGram International (NASDAQ:MGI) as a solid comparison for a potential acquisition due to its mix of brick-and-mortar and digital presence in new or underpenetrated geographic markets.

In other recent news, International Money Express (NASDAQ:IMXI), known as Intermex, has been making significant strides in its business operations. Intermex recently announced an acquisition of key assets and operations of Amigo Paisano, a Guatemalan remittance service provider, in a strategic move to enhance its digital offerings and expand its presence in Central America. This follows the company's robust third-quarter results, where it reported a GAAP EPS increase of 29.3% to $0.53 and a record high adjusted EBITDA of $33.9 million, marking a 7% increase.

The company's digital revenue also saw a significant surge, growing over 66% year-over-year, contributing to a total revenue of $171.9 million for the quarter. In addition to these developments, Intermex announced a strategic review aimed at enhancing shareholder value. BMO Capital Markets responded to these developments by increasing its price target for Intermex shares from $27.00 to $30.00, while reiterating its Outperform rating.

BMO Capital Markets' revised outlook comes in light of Intermex's impressive performance in its retail operations and digital segment growth. The firm raised its out-year estimates by 3-4%, leading to the new price target. These developments are part of Intermex's broader aim to balance retail and digital operations while focusing on profitability and digital investments.

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