MIDAS SHARE TIPS UPDATE: Keep our tip Boku, which has tripled in a year
Midas tipped Boku 59p right at the start of the first lockdown, as consumers around the world staying at home watched, played and paid for everything on mobile phones.
A year later, in March 2021, the online payments business had risen to £1.74 per share as readers were advised to save some of the profits.
Last week, Boku showed that it still has a winning formula when it comes to payments technology. First half results showed that local payment methods now account for a fifth of sales.
Local payment methods are, as the name suggests, transactions that are only used in certain parts of the world. They are gaining popularity among an emerging global middle class that is bypassing traditional credit card brands and moving directly to country-specific e-wallet payments, buy now, pay later or SMS payments.
Thanks to Boku, customers using these methods can pay for subscriptions to Spotify, PlayStation and Netflix on their phones.
Simplicity: Boku enables phone payments and the company’s debt-free status gives it room for investment
By doing more business with these “mega-retailers,” Boku can continue to increase its sales without having to acquire new customers, according to stockbroker Peel Hunt. So as long as payment methods around the world remain fragmented, Boku will thrive.
Profit after tax fell as the company made a one-time gain from selling a business last year. But adjusted earnings before interest, taxes, depreciation and amortization (a key measure of core profitability) rose 28 percent. Based on this metric and enterprise value, Peel Hunt estimates that Boku is trading at a 25 percent discount to its peers. The company has no debt.
A change is on the horizon for Boku: respected CEO Jon Prideaux is moving to a non-executive position. The new boss, Stuart Neal, is Boku’s former chief commercial officer and former commercial director of Barclaycard. He has extensive knowledge of the company and the industry.
Boku share price performance over the last 12 months has been impressive – up 41 percent since September 2022, although it is still below the highs reached in March 2021, when we advised profit-taking.
Midas judgment: The meteoric rise of local payment methods as a revenue generator for Boku shows that this company is nimble and able to capitalize on trends. The decline in cash isn’t slowing down any time soon, and Boku’s work with major companies from Netflix to Amazon gives the company plenty of room to grow.
Analysts raised their forecasts following Boku’s results, and the company’s debt-free status gives it room to invest. By most metrics, the stocks appear to be a good choice.
There is no denying that they have fallen back from their highs in 2021 after a very good run after Midas first tipped them in 2020. However, at £1.46 it’s worth saving for the next chapter of the Boku story.
Traded on: GOAL Ticker: BOKU Contact: boku.com or via IFC advice on 020 3934 6630