Remitly stock price could benefit from the US migration crisis

Remitly (NASDAQ: RELY) stock price has crawled back in the past two years as demand for its services has risen substantially. After crashing to $6.5 in May 2022, the stock has surged to over $20, giving it a market cap of over $3.8 billion.

Remitly is one of the top payment companies in the US. The company provides an easy-to-use platform that lets people send money around the world.

Specifically, Remitly focuses on the migrant community, who use it to send money to their friends and loved ones around the world.

Therefore, the company could benefit from the ongoing migration trends. The US has had over 7 million new people come in in the past few years and the trend may continue rising. 

Over 10,000 new people are coming to the country through the Mexican border. More people are also moving to the country through airports and overstaying their visas. The same trend is happening in Europe.

The impact of all this is that most of these people will start working in the US and then sending some of their money back home. The challenge for Remitly is that it operates in a highly competitive market, with companies like PayPal, Wise, and WorldRemit having a strong market share.

This explains why the company’s revenue growth has continued growing. Its revenue jumped by 39% in the fourth quarter to $265 million. Its annual revenue soared by 44% to $944 million. Also, the number of quarterly active users rose from 4.1 million in Q4’22 to 5.91 million in Q4’23.

Remitly is also focused on boosting its profitability. Its net loss in 2023 came in at $118 million, a small increase from the previous year’s $114 million. Most of these losses are because of the company’s investments in marketing. The firm expects that this marketing spend will be beneficial in terms of the lifetime value of the customer.

Remitly expects that its business will continue doing well. The hope is that its total revenue will be between $1.22 billion and $1.25 billion. It also expects that the number of users in its ecosystem will grow by more than 30% this year. 

The daily chart shows that the RELY share price bottomed at $6.55 in May 2022 and then recovered to $27.93 in November. Recently, it has crashed to about $20 as investors remain concerned about its marketing spend. 

The stock has formed what looks like an inverse head and shoulders pattern, which is a popular bullish sign. It remains a few points above the 50-day and 25-day moving averages.

My view is that the stock will have some short-term volatility and then bounce back later this year. If this happens, it will likely rise and retest last year’s high of $27.93, which is about 40% above the current price.

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