| Yesterday, Mogo announced that it has officially launched its highly-anticipated commission-free stock trading application called “MogoTrade”. This is a major product launch for Mogo and one that enhances the company's broader platform as a key tool to potentially drive accelerated user growth, engagement and cross-selling opportunities and will serve as the core of the company's digital wealth strategy, which the company notes, begins with equities but will be diversified to include other assets like cryptocurrencies and NFT's in the future. The launch of MogoTrade is in line with the company's overall strategy of building a next-gen digital ecosystem aimed at Millennial, Gen-Z and underbanked Canadians and we continue to believe that there is significant value inherent in the Mogo platform which is not being fully recognized in the company's share price. Impact: Positive Key Highlights: · MogoTrade is a mobile application which allows Canadian users to trade equities commission-free on its platform similar to Robinhood’s (HOOD, Not Rated) commission-free stock trading platform in the United States. MogoTrade will be one of only a handful of such products in the Canadian marketplace (a notable example being Wealthsimple Trade (Private)) and it further bolsters Mogo’s broader platform with yet another product offering to go along with MogoCard, MogoCrypto and consumer loans, among others. · We see 3 key benefits arising from the launch of MogoTrade: 1) We believe that commission-free stock trading will likely be a catalyst to drive accelerated user acquisition onto Mogo’s platform, 2) We think the offering can act as a key engagement tool allowing the company to potentially cross sell into its suite of product offerings and thus driving broader monetization opportunities and 3) a direct user monetization opportunity (via a currency exchange fee above the current conversion rate on all USD denominated trades), as Mogo can immediately target its vast user base of 1.8mm members, as initial users of the application. Recall initial revenue contributions from MogoTrade are expected in F22 and were baked into the company's increased revenue guidance issued during Mogo’s Q3/F21 results release. · Phased rollout throughout Q1/F22. While certain Mogo members will be able to trade immediately, currently most users get immediate access to live-streaming stock prices within the application. The commission-free stock trading feature will be rolled out in a phased approach with Mogo initially inviting existing Mogo members to the service throughout Q1/F22 via a waitlist. A rollout to the broader Canadian market will follow along with a full-on marketing campaign leveraging Influencers and a potential TV campaign. Target Price Valuation Methodology: We value Mogo using a sum-of-the-parts valuation. We ascribe a value of $11.00/share to Mogo's FinTech business based on 10x F22E Sales multiple, in-line with the FinTech peer group but a discount to Block Inc. (SQ, Not Rated) trading at nearly 12x and we ascribe C$5.00 on Mogo's investment in Coinsquare (Private). |