Marketwise (MKTW) is a company comprised of 12 primary customer-facing brands reaching more than 10 million self-directed investors. The company provides products such as financial research, education, and investment software. All of their products are 100% digital and direct-to-consumer. Some of their more well know brand includes Investorplace, TradeSmith, and Stansberry Research. The company aims to allow individual investors to have better investing tools by providing a leading financial subscription services platform. The self-served financial market is huge as individual investors are continuously seeking more professional services and tools. The company’s Insightful and engaging contents are able to drive users from free to paid subscribers and are easy to retain once they are used to relying on the content provided. The company is highly scalable as it is able to up-sell higher ARPU (average revenue per user) products to customers without extra cost and also to cross-sell products between their different brands. The increase of millennial and self-directed ‘Robinhood’ and ‘SOFI’ investors provides huge future upside.
The company is comprised of 12 primary brands and each of them serves different products. Financial wellness solutions have a huge TAM (total addressable market) of $191 billion and 2020 US Self-directed Investors are listed at approximately 63 million with a CAGR of 19% for online revenue from global self-directed investors. The company’s brands are capturing more and more of the TAM and it is growing quickly. The 12 brands with over 160 products are able to provide a very wide range of offering other financial companies may not be able to provide and also reduce the risk of being focused on only one service. Here is a brief overview of some of the brands under the company.
-Investorplace provides market news, stocks advice, and market tips. It is currently one of the largest and most popular financial publishers in the world with over 40 years of heritage.
-Marketsmith provides stocks research and investment tools for individual investors, it is one of the most popular daily graphs online investment research services with unparalleled pro-level equity researching capabilities and an intuitive product flow.
– Stransberry research provides premium research services that cover a wide range of investment strategies including dividend investing, fixed income, value investing, etc, and also complete portfolio solutions.
-Chaikin Analytics is a stock trading idea platform for investors and advisors. Its rating system uses its own indicator that helps pick winning stocks and drop losing stocks ahead of market shifts.
These different products are able to provide a full suite for customers and once the customer is hooked onto one of the products it is easy for the company to up-sell and cross-sell different products to drive ARPU up and this is a huge advantage for Marketwise as there is not much other company have the bags of tricks like them.
Fundamentals and Financials
The company grew its product offering from less than 50 to over 160+ in 2020 which helped drive>$300 million in billings and is planning to release more product offerings. The company currently has 9.5m free subscribers, 544k paid subscribers with less than $600 cumulative spendings, 215k high-value subscribers with $600-$5000 cumulative spendings, and 98k ultra high-value subscribers with over $5000 cumulative spendings. The company has a best-in-class conversion rate, it is able to convert 6% of free subscribers into paid subscribers, 37% paid subscribers into high-value subscribers, and 31% high-value subscribers into ultra-high-value subscribers. 73% of subscribers have a net asset of over $150,000 which means most of the subscribers have the money to keep renewing their subscription. Paid subscribers are projected to increase from 857 thousand in 2020 to 1.3 million in 2022 which represents a 24% CAGR. Revenue is expected to increase from $364m to $729m which represents a 41% CAGR, billings are expected to increase from $548m to $948m which represents a 34% CAGR. The revenue retention rate is expected to remain at 95%+ each year and gross margins are forecasted to be between 86% to 87% range.
As of the time of writing, the company is currently trading at 3.5x 2022 EV/sales compared to other digital subscription and info services that are trading at 7.2x 2021 EV/sales and are growing slower. The median 20–22 CAGR for digital subscription and info services is 10% with a gross margin of 70.2% which is significantly lower than Beacon Street which its 20–22 CAGR is 41.5% with a gross margin of 86%. These numbers are very impressive for a financial service company and with their subscription model being intact I believe it can maintain growth in the long run. The valuation is also really cheap amid it growing quickly, therefore, I believe Marketwise stock will do well in the future.
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