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Needham sets a ‘Buy’ rating for Cardlytics as JPM acquires Figg; What’s next for CDLX?

Needham sets a 'Buy' rating for Cardlytics as JPM acquires Figg; What's next for CDLX?
Jordan Major

Independent investment bank and asset management firm Needham & Company, which specializes in financings for growth companies, has set a ‘buy’ rating for Cardlytics (NASDAQ: CDLX) despite the stock being down almost 80% year-to-date (YTD).

It is interesting to note that Needham has established a price target of $24 for Cardlytics, which is still less than the $25 at which CDLX stock was trading a little less than a month ago, the firm noted:

“We are reiterating our BUY rating but lowering our price target to $24 (from $60).”

Notably, JPMorgan Chase & Co.’s (NYSE: JPM) acquisition of the industry-leading card-linking platform Figg seems to have been a key driver behind a substantial amount of negative price movement on CDLX in the previous month. Interestingly, Figg offers a rival product to Cardlytics that operates in the same market and is backed by one of the largest banks in the United States.

However, one of the key points, according to Needham, in its recent report on ‘How Will JPM’s Acquisition of Figg Impact CDLX?’, is that Figg is unlikely to acquire the same clientele as Cardlytics since other banks would be hesitant to share their data with a product operated by their competitors.

Indeed, Needham noted:

“As Figg is integrated into JPM, we expect some client attrition on Figg’s side as other FIs are unlikely to be comfortable giving a subsidiary of JPM access to transaction data. Our view is that CDLX would be a natural destination if current Figg clients look to migrate their card-linked offers programs to another provider in response to the acquisition.”

CDLX chart and analysis

In the last month, CDLX has been trading in between the $13.22 and $27.58 range, which is quite broad and it is currently trading near the lows of this range.

What’s more, when analysing the resistance areas of CDLX, one line is formed at around $19.26 while another is located near $21.75 on the daily time frame.

CDLX 20-50-200 SMA lines chart. Source. data. See more stocks here.

With volume considerably higher in the last couple of days, CDLX does not present a quality setup at the moment; as price movement has been a little bit too volatile to find a solid entry point, it would be prudent to wait for a period of consolidation first.

On Wall Street, the consensus rating among analysts for the stock is a ‘hold’ although they predict Cardlytics to trade at $23.50 (59.65% upside) over the next 12 months from its last price of $14.70, at the time of publication.

Wall Street analysts’ price targets for CDLX. Source: TipRanks

The highest price target is $35, while the lowest estimate is $15 over the next 12 months, which would still be higher than the stock’s current price.

Needham is bullish on CDLX

In addition to valuing the company’s relationship with consumer banks and the positive trends expected to emerge with digital banking, Needham believes CDLX’s access to 50% of card swipe data is a valuable asset. 

“The company’s relationships with many of the largest consumer banks in the U.S. provide it an impressive customer base for its highly targeted marketing campaigns. In addition, we believe that positive trends in digital banking and payments will serve as natural tailwinds to growth.”

As things stand, the stock is up 3% at market open, and time will tell whether Cardlytics can be improved to the point where the stock can meet the price goal set by analysts. 

The company’s financial results for the second quarter, which concluded on June 30, 2022, will be made public on Tuesday, August 2, 2022, after the market has closed. A lot is expended to depend on those earnings. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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